Why Wage Growth Patterns Are Flashing Warning Signs in 2025
Wage growth patterns are sending shockwaves through economic forecasts—and 2025 looks poised to deliver some brutal reality checks.
Stagnant salaries can't keep up with inflation's relentless march, squeezing household budgets and sparking concerns about consumer spending resilience.
Meanwhile, corporate profit margins continue to balloon—because nothing says 'healthy economy' like record executive bonuses while real wages stagnate.
Workers are caught between rising costs and flat paychecks, creating a pressure cooker that could finally boil over next year.
Economic policymakers are watching nervously—another case of theoretical models crashing into actual human behavior.
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While the difference is small (4.1% versus 4%), it’s still a signal that the job market may be weakening. Historically, such reversals in wage growth trends have only happened during economic downturns, like the dot-com bust and the Great Recession. In fact, Erica Groshen, a senior economics advisor at Cornell and former head of the Bureau of Labor Statistics, noted that these patterns usually appear when the labor market is soft. Although broader data still shows a relatively strong job market, things have cooled down since the hiring surge in 2021 and 2022, when job openings were at record highs and quitting for better pay was common.
Now, with high interest rates and economic concerns, hiring has slowed to the lowest pace in over a decade, and the quits rate has dropped to around 2%, the lowest level since early 2016 (excluding the early pandemic). This shift has reduced workers’ bargaining power, especially for those forced to change jobs. In addition, long-term unemployment lasting six months or more is rising, with 25% of jobless individuals falling into that category in July.
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