"President Trump's tariff regime is about to start suppressing wage growth in the U.S., according to data compiled by Pantheon Macroeconomics analysts Samuel Tombs and Oliver Allen. The pair admit annual wage growth in the U.S. has been "fairly robust" so far this year-it was 3.7% in August, down from 4.0% the previous December. But, they argue, a key job market indicator recently hit zero, signaling that employers are reducing pay growth when offering new jobs."
"The Atlanta Fed's Wage Growth Tracker measures "switchers and stayers": wage growth gained by people who switch jobs minus the growth gained by those who stay. The gauge is usually positive because switchers generally switch for higher pay, while pay growth for people who stay with a company usually goes up less dramatically. But in recent months, the two measures have cancelled each other out-meaning job switchers are not finding higher pay growth elsewhere in the market."
"Pantheon argues wage growth is an important measure even though it is often eclipsed in the news by the jobs number and the unemployment rate because "a half-percentage point slowing in year-over-year growth in wages has just as much impact on labor income as a 70K decline in monthly payroll growth.""
Tariff changes are starting to reduce wage growth in the U.S. Annual wage growth fell from 4.0% in December to 3.7% in August, and key labor market indicators have deteriorated. The Atlanta Fed's Wage Growth Tracker shows that the premium for job switchers has disappeared, meaning switchers are not finding higher pay elsewhere. The ratio of job openings to unemployed people has dropped below one, and four of five regional Fed surveys report a slump in companies planning wage increases. Wage growth is projected to slow to about 3% by early 2026. Companies facing import taxes are cutting pay to protect margins.
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