The U.S. Labor Department released data Friday showing that wage and job growth slowed in December as the Fed explicitly targets the labor market and worker pay in its push to tamp down inflation, which has been cooling in recent months.
According to the new figures, wages grew at a slower-than-expected rate of 0.3% last month, and November’s hourly earnings number was revised down from 0.6% to 0.4%—a trend that one observer called “bad news for workers.”
Pointing to the “huge downward revision to November wage growth,” Dean Baker of the Center for Economic and Policy Research wrote, “Hold the rate hikes please.”
“Hold the rate hikes please.” —Dean Baker, CEPR
While CEO pay has continued to surge, many ordinary workers across the U.S. have seen their wages lag behind inflation as living costs have risen sharply over the past two years.
Elise Gould, an economist at the Economic Policy Institute (EPI), said slowing wage growth is critical for Fed policymakers to consider as they mull additional interest rate hikes, which risk unnecessarily hurling the economy into recession.
“Wage growth decelerated in December no matter how it’s measured,” Gould noted. “Annualized wage growth between November and December was 3.4%. It is decidedly not driving inflation.”
Gould’s EPI colleague Heidi Shierholz agreed, describing recent wage growth as “completely non-inflationary.”
“By this measure, the Fed’s work is done,” she wrote on Twitter.
Job growth, meanwhile, remained strong in December even as it cooled compared to the torrid pace of early 2022. The Bureau of Labor Statistics said the U.S. added a better-than-anticipated 223,000 jobs in the last month of 2022, the fifth consecutive month of slowing growth.
The new jobs data comes days after the Fed released the minutes of its mid-December meeting, after which the central bank raised interest rates to their highest level in 15 years despite growing warnings from a range of experts about the potential for a damaging recession and mass layoffs.
According to the minutes, Fed officials are not yet satisfied with evidence showing that inflation is slowing significantly and intend to stay the course with higher rates. Central bankers also suggested they believe the labor market is still too tight and wage growth is too strong, reiterating their goal of “bringing down” the latter even as they admitted there are “few signs of adverse wage-price dynamics.”
“You know the Fed’s priorities are warped when they suggest too many Americans have jobs,” Liz Zelnick, director of the Economic Security and Corporate Power program at the watchdog group Accountable.US, said Friday. “It seems the more Americans find work, the more the Fed embraces job-killing interest rate hikes that disproportionately hurt low-income workers and struggling mom-and-pop shops. And for what?”
“The Fed’s single-minded strategy has done little to blunt the real driver of inflation—corporate greed,” Zelnick added. “Across industries, corporations continue to mark up prices on working families despite posting record profits and rewarding wealthy investors with billions in giveaways. Raising interest rates only hurts American families in the long run by pushing the economy toward a cliff. Recession is not inevitable, but that depends largely on deliberate decisions made by the Federal Reserve and Chairman Jerome Powell.”
Michael Mitchell, director of policy and research at the Groundwork Collaborative, echoed that warning ahead of Friday’s jobs report, cautioning that “as workers and families are struggling with higher prices, Chair Powell is hell-bent on bringing down wages and pushing more people out of work with his aggressive interest rate hikes.”
“If the Fed continues with its dangerous interest rate hikes,” Mitchell said, “we should brace ourselves for more hardship for working people and an unnecessarily painful recession.”
