The Low-Wage Worker Pay Boost May Be Over

By: Anneken Tappe · November 15, 2023 · Reading Time: 2 minutes

Wage Growth Wanes

The pandemic affected the economy in many ways. As businesses struggled to get workers to join them for the great reopening, low-wage jobs got a juicy pay boost. Fast forward to today, that wage boost effect is waning, and that might have a knock-on effect on the economy.

Economic Tides Turning

As more workers are looking for jobs, and the high interest rate environment is starting to bite, which is weighing on wage growth.

Case in point, workers in lower-paying industries had their pay rise 5.9% in October, down from 7.2% in January, according to the Federal Reserve Bank of Atlanta.

First things first, wages are still rising, and that’s a good thing for workers. However, the pace has come down significantly, even though low-wage workers are still outperforming other groups when it comes to percentage gains. Overall wage growth decelerated to 5.8% from 6.3% in the period.

Retail Reactions

This decline in wage growth is sending ripples through the retail sector amid worries that consumers might spend less over the crucial holiday shopping season. Retail giants like Macy’s (M), Home Depot (HD), and Target (TGT) are cautioning against pullbacks in spending, especially as Americans have been struggling with high inflation for some two and a half years now.

So far, consumer spending has stayed strong, buoying economic growth. But with interest rates still high and wage growth coming down, it could be reaching a tipping point, which, in turn, could have major implications for the health of the U.S. economy.

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