Assessing the Current State of Wage Inflation

Richard Audoly, Martin Almuzara and Davide Melcangi

No 20260526, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Economists often look at nominal wage growth to gauge labor market imbalances, price pressures, and households’ spending ability. But to use wage growth for these purposes, it is important to look through short-run fluctuations and retrieve underlying wage inflation. In this post, we use our own measure of wage growth persistence—called Trend Wage Inflation (TWIn in short)—to summarize what we learned from wage growth behavior in the past years and draw conclusions for what may lie ahead. Since peaking in late 2021, TWIn has been on a steady decline, reaching levels near those of the 2017-19 period. In the past few months, however, this decline seems to have lost momentum. Our analysis shows that most of the decline in TWIn between 2022 and 2025 was common across industries. Recently, however, a few sectors have shown a decoupling of wage growth dynamics.

Keywords: wages; Inflation (search for similar items in EconPapers)
JEL-codes: C33 E24 (search for similar items in EconPapers)
Date: 2026-05-26
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:103302

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DOI: 10.59576/lse.20260526

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