Federal Reserve Chair Jerome Powell recently reiterated his belief that “the labor market is not a source of significant inflationary pressures,” and the latest Employment Cost Index data did nothing to suggest otherwise. Wage growth remains solid, but employers are clearly feeling less pressure to raise pay than they did a year or two ago. While employer demand remains above pre-pandemic norms in some sectors, the labor market shows signs of balancing out

Today’s data showed a slight uptick in quarterly wage growth for private-sector workers. However, year-over-year wage growth for that group dropped to 3.6% in the fourth quarter, still healthy, but down from 4.3% at the same time a year ago. When workers with more volatile compensation (those paid on commission, for example) are removed, the slowing trend is even more apparent, with pay growth slowing in both quarterly and year-over-year measures.

Looking ahead, data from the Indeed Wage Tracker shows that posted wage growth has been relatively stable in recent months, suggesting that the years-long slowdown in pay growth may be coming to an end as the market normalizes.