American workers are continuing to see their pay packets grow, providing a measure of relief for household budgets as wages rise faster than inflation. The latest employment data released by the US Department of Labor indicates that earnings growth remains resilient even as inflation stays above the Federal Reserve’s long-term target.
According to the Bureau of Labor Statistics (BLS), wage increases have maintained a steady pace, helping to support purchasing power for workers across the country. The report shows that annual wage growth reached 3.8%, giving households a modest buffer against persistent price pressures.
At the same time, working hours across the economy have largely remained stable. The average workweek held steady at 34.3 hours, matching the forecast from LSEG economists and remaining unchanged from January’s figure.
US Workweek Data Shows Stability Across Key Sectors
The BLS report also provided insight into working hours across industries. Within the manufacturing sector, the average workweek dipped slightly by 0.1 hour to 40.1 hours. Overtime hours in the sector were unchanged at three hours.
These figures suggest relative stability in labour demand even as broader economic conditions remain uncertain. The steady hours worked come as inflation continues to hover above the Federal Reserve’s target rate.
The Fed’s preferred measure of inflation, the personal consumption expenditures (PCE) index, recorded a 2.9% annual increase in December. Core PCE, which excludes volatile food and energy prices, rose 3% compared with the same period a year earlier.
Inflation Trends Continue To Influence Household Spending
Another widely followed inflation indicator, the consumer price index (CPI), showed a more moderate trend. CPI increased by 2.4% year-on-year in January, down from a 2.7% reading in December. Core CPI rose 2.5% over the same period.
Inflation can place heavy strain on household finances, particularly for lower-income families that spend a larger share of their income on essential goods and services. Wage growth that outpaces inflation can help maintain purchasing power, though persistent price pressures continue to affect budgets.
The unemployment rate edged slightly higher in February, rising from 4.3% to 4.4% compared with the previous month.
“Jobs in the private sector, along with ongoing reductions in federal government staffing, led to lower payroll employment in February. But the unemployment rate remains low because of the southern border shutdown. That is why wage growth remains healthy with a 3.8% rise,” said Lawrence Yun, chief economist at the National Association of Realtors.
Employers Face Ongoing Competition For Skilled Workers
Economists say strong wage growth may also reflect continued competition among employers for skilled labour.
Andy Bregenzer, head of U.S. regional and small business banking and co-head of commercial bank at TD, said it was “disappointing to see January’s hiring momentum come into question with February’s slowdown” and emphasised the need for caution among smaller firms.
“What we continue to hear from small business owners is that while hiring pressure may ease modestly if jobs growth slows, wages and competition for skilled workers remain elevated. This is the environment where small business owners need to stay disciplined and balance growth plans with careful cost management.”
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Gregory Daco, chief economist at EY-Parthenon, noted that wage dynamics were “firmer than expected” and said the 3.8% annual wage growth underscored that “labor cost pressures remain sticky even as job growth falters.”
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