U.S. Labor Market — Average Hourly Earnings: wage persistence with gradual moderation in momentum
Average Hourly Earnings provide a direct read on labor cost dynamics and are a key input for assessing underlying inflation persistence in labor-intensive sectors. The series presented here corresponds to private-sector production and nonsupervisory employees, a widely followed wage gauge within the monthly employment report.
Earnings have continued to rise steadily since early 2023, increasing from approximately $28.3 to $31.8 by late 2025. This cumulative gain underscores that wage levels remain on an upward trajectory even as other labor market indicators suggest a gradual cooling process.
Recent dynamics
Over 2023 and 2024, wage growth remained firm, reflecting still-tight labor conditions and elevated labor demand. Through 2025, earnings continued to advance, but the data increasingly point to moderation at the margin, with monthly changes becoming smaller and less uniform.
Late-2025 readings are consistent with this profile: earnings remain elevated and rising in level, but recent increments are more measured than earlier in the cycle. This configuration supports a view of wage persistence with gradual normalization in momentum rather than a sharp break.
Wages, labor slack, and inflation implications
Wage dynamics typically respond with lags to changes in labor market slack. As hiring momentum slows and unemployment edges higher, firms often adjust wage policies more slowly than they adjust headcount plans, particularly in services where labor is a dominant input.
From a macroeconomic perspective, this persistence matters because service-sector inflation is closely linked to labor costs. Even if disinflation progresses in goods-sensitive components, steady wage growth can keep underlying inflation pressures from converging rapidly.
Macro context and policy relevance
Recent policy communications have emphasized that wage growth has generally moderated from earlier highs, even while remaining inconsistent with a quick return to fully normalized inflation dynamics. This aligns with the broader labor market picture of orderly cooling: slower job creation, slightly higher unemployment, and wage growth that is easing only gradually.
For monetary policy, the key implication is balance. Moderation in wage momentum reduces the risk of renewed wage-driven inflation acceleration, but persistent gains in earnings levels limit confidence in a rapid normalization of labor-cost pressures.
Conclusion
Average Hourly Earnings continue to signal ongoing wage persistence alongside incremental moderation in momentum. The labor market appears to be adjusting more through slower hiring and gradual rebalancing than through abrupt wage compression.
As a result, wages remain an important channel for assessing underlying inflation persistence and a key variable for interpreting how quickly the economy can normalize without sacrificing labor market stability.