Key Takeaways

  • Wage growth indicators fell to their lowest level since April 2021, according to a quarterly survey released Monday by the National Association for Business Economics (NABE).
  • In the NABE panel, only 41% of economists reported wage increases over the past three months; this quarter, 51% of respondents expect wages to remain unchanged, while 48% expect increases.
  • Julia Pollak, chief economist at ZipRecruiter, said wages are no longer a major inflation concern, and wage growth is expected to continue slowing, but at a very gradual pace.

Deep Dive

The NABE survey results align with several recent studies, all showing that wage growth is slowing.

A December survey by the National Federation of Independent Business (NFIB) found that the share of small businesses reporting higher compensation fell to its lowest level since March 2021. The share of respondents planning to raise employee compensation in the next three months also declined from November.

Additionally, a Gartner survey showed that the share of chief financial officers (CFOs) planning to increase average compensation in the coming year fell to 61% in 2025, down from 71% in 2024 and 86% in 2023.

"The slowdown in compensation growth reflects declining inflation and lower voluntary employee turnover," said Randeep Rathindran, vice president of research at Gartner, in a statement Monday. "While the labor market is cooling, CFOs must balance potential attrition risks and risks of declining engagement as employees still face high costs for household essentials," he added.

In recent years, U.S. employers adapted to the tightest labor market in decades following the pandemic shock, with wage growth at times outpacing inflation. The U.S. Bureau of Labor Statistics reported Wednesday that median weekly wages rose 4.1% year-over-year in the fourth quarter of 2024, exceeding the 2.7% increase in the consumer price index over the same period.

Meanwhile, labor demand eased in 2024, with the unemployment rate rising from 3.7% in January to 4.1% in December.

"Few employers cite labor shortages as a major concern, and when they do, it's limited to specific, specialized, high-skilled roles that can attract talent through higher pay and better benefits," Pollak said. "These shortages are not widespread like during the pandemic. Therefore, for most positions, employers do not feel significant pressure to raise wages, which is a key reason why wage growth is expected to slow further," she noted.

The NABE survey also found that 61% of respondents viewed uncertainty over the timing and approach of the Trump administration's policies as the biggest risk. Recession and the potential drag on growth from restrictive monetary policy have receded as the biggest clouds over the business outlook.

Pollak described economists' focus as shifting "from one storm to another." "In previous surveys, the main uncertainty was what Federal Reserve Chair Jerome Powell would do, and now it's what Donald Trump will do," she said.

The NABE survey was conducted between December 30, 2024, and January 13, 2025, polling 70 economists.