Wage growth is cooling — but workers still have bargaining power, economists say

cnbc.com:

The pace of wage growth seems to be decelerating, according to the February jobs report issued Friday — but workers still have bargaining power in a cooling but strong job market, economists said.

«Workers have a very strong negotiating position,» Mark Zandi, chief economist of Moody's Analytics. «The labor market is still very strong and workers are still in the driver's seat.»

Workers have enjoyed historically large raises and pay increases since early 2021. Employers had to compete for workers in a hot market characterized by record job openings and turnover.

While growth is still above average, the trendline points at a slowdown, economists said.

Employees saw their average hourly earnings increase by 0.2% from January to February, the U.S. Bureau of Labor Statistics said Friday. That's down from a monthly rate of 0.3% in January and December, and 0.6% in November.

It's also the slowest monthly gain since February 2022, according to Jeffrey Roach, chief economist at LPL Financial.

Meanwhile, other pay indicators also suggest a pullback.

Annual wage growth declined to 6.1% in January from a peak 6.7% over the summer, according to the Federal Reserve Bank of Atlanta. However, the current level is still higher than any pre-pandemic point in the past 25 years, data show.

Average compensation growth — including wages, salaries and benefits — declined to 1% in December from 1.2% in September, according to the Employment Cost Index, issued quarterly. (These figures are a three-month average.)

«Wage growth feels like it has rolled over,» Zandi said.

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