Analysis Shows Wage Growth Cooled, But Pockets of Heat Remain in Certain Job Sectors

As of March 2024, wage growth in the United States has shown signs of moderation from the rapid pace experienced during the pandemic. However, certain industries continue to experience notable increases in average annual pay, contributing to a diverse landscape of compensation across sectors.

Industry Variability

According to a recent analysis by job site Indeed, the national average wage growth in March 2024 was recorded at 3.1% annually, marking a considerable decline from the peak of 9.3% in January 2022. Nonetheless, the report highlights significant disparities across different industries, as noted by Julia Pollak, the chief economist at career site ZipRecruiter.

Standout Sectors

Following closely behind, the dental and child care industries reported annual growth rates of 4.8%, signaling substantial increases in compensation for professionals in these fields. Likewise, the medical information and cleaning and sanitation sectors displayed notable growth, both recording a 3.9% uptick in average wages. Conversely, software developers experienced the lowest annual growth at 0.4%, down from a peak of 9% in April 2022, highlighting the contrast in wage dynamics across professions.

Effect on Job Choices

While robust wage growth is a positive indicator, labor economist Allison Shrivastava cautioned that it may not directly influence career decisions, particularly in contrasting professions. She emphasized that despite the higher wage growth in specific industries such as child care, individuals in comparable-paying roles like retail or food preparation might find it more compelling to seek opportunities in these burgeoning sectors.

Income Disparity

Shrivastava further highlighted the income disparity across various occupations, citing the considerable discrepancy between the average earnings of child care workers and software developers. According to data from the U.S. Bureau of Labor Statistics, the average hourly wage for a child care worker stands at $15.42, translating to an annual income of $32,070. In contrast, software developers command an average hourly wage of $66.40, amounting to an annual income of $138,110.

Market Evolution

The surge in wage growth witnessed in 2021 and 2022 was attributed to employers' efforts to attract and retain talent in the face of labor scarcity and heightened inflation. Notably, these increases occurred at varying times across industries, reflecting the intricate interplay of factors influenced by the pandemic.

Moreover, the landscape of employment underwent significant shifts, particularly with the rise of remote work, which rendered certain face-to-face occupations less appealing, contributing to higher turnover rates in those sectors. For instance, workers in accommodation and food services experienced a peak annual earnings growth of 16.1% in December 2021, while those in the information sector reached a peak of 7.8% in September 2022, underscoring the differential impact of evolving work dynamics.

Current Market Outlook

As of the present, national wage growth aligns with the pre-pandemic average of 2019, indicating a generally stable and healthy labor market. Although the rapid wage growth witnessed in recent years did not fully offset inflation, the subsequent decline in inflation levels has resulted in an overall improvement in purchasing power for the average worker.