Data through: October 2026 · updated Nov 6 · Updates: Monthly · Next: Dec 4
MThe three bars show the last 3 months for this indicator, oldest left to newest right. Bar height reflects each reading relative to the other two — the tallest is the highest of the three, the shortest the lowest.
Historical context: Currently in the 54th percentile of all historical readings.
What this means right now: Wage growth is in the ideal band — 2.5–3.5%. Workers are gaining after inflation at a pace that fits the Fed's 2% inflation target, as in 2007–09, 2015–20 and 2026. Labor costs are not pushing prices up here.
Wage Growth · Monthly · 2007–2026
NBER recessions
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Monthly values
Wage Growth — the last 12 months
Every month's reading, with the band the heatmap gives it. The chart above shows the same series in full.
Month
Value
Band
Oct 2026
+3.1% YoY
Very strong reading
Sep 2026
+3.2% YoY
Very strong reading
Aug 2026
+3.1% YoY
Very strong reading
Jul 2026
+3.2% YoY
Very strong reading
Jun 2026
+3.4% YoY
Very strong reading
May 2026
+3.3% YoY
Very strong reading
Month-end readings of the same series as the chart. Values are the current record, not point-in-time: a month that has since been revised shows its revised value.
What is the Wage Growth?
Average Hourly Earnings (AHE) measures how much more private-sector workers earn per hour than a year earlier. It is the main measure of wage inflation in the United States and comes out monthly with the jobs report. The Federal Reserve watches it closely because wages are the largest cost for most businesses. On this site's record (from 2007 to September 2026) wages and consumer prices have moved together, with prices leading wages by about six months rather than the reverse.
There is a sweet spot. Too low (below 2%) has come after recessions (2010–15), not before them, and workers lose ground to any inflation at all. Just right (2.5–3.5%, with 3.5–4.5% still healthy) means workers are gaining after inflation and the economy is balanced. Too high (5% and above) has been recorded only in 2020–22. The post-COVID wage surge, which peaked near 6% in March 2022, came with the worst inflation since 1981 — CPI 9.0% in June 2022.
How We Color-Code the Wage Growth
Our heatmap colors this indicator against historically significant thresholds:
Below 1.0%
Wages stalled — seen once, in April 2021, and only as a statistical echo of the pandemic layoffs a year earlier
1.0% – 1.5%
Very weak wage gains — never recorded in the series (since 2007)
1.5% – 2.0%
Weak — the years of slack after the financial crisis, 2009–15
2.0% – 2.5%
Modest — 2009–17 and 2021; workers gaining slowly
2.5% – 3.5%
The ideal band — workers gaining after inflation without pushing prices up; 2007–09, 2015–20 and 2026
3.5% – 4.5%
Firm — healthy gains that productivity growth can still absorb; 2007–09, 2019, 2021 and 2023–26
4.5% – 5.0%
Elevated — above the Fed's comfort zone; 2020–23
5.0% – 5.5%
High — labor costs rising fast enough to push prices up; 2020–22
5.5% or above
Very high — through September 2026, reached only in 2020 (8.1% in April, a distortion from the mass layoffs of lower-paid workers) and in early 2022 (5.9% in March)
Historical Extremes — What Happened Next?
When this indicator reaches extreme levels, history shows consistent patterns:
Mar 2022Post-COVID Wage Peak
+5.9% YoY
The post-COVID peak in wage growth, at the height of the inflation: CPI reached 9.0% in June 2022, its highest since 1981, and the Fed took its policy rate from 0.20% in March 2022 to 5.33% by August 2023.
2010-2015Post-Crisis Stagnation
Wage growth: +1.6% – 2.5% YoY
Wage growth stayed low for years after the financial crisis. With so many people out of work, workers had little bargaining power, and the Fed held its policy rate between 0.07% and 0.24% throughout.
2019Pre-COVID Sweet Spot
Wage growth: +3.0% – 3.6% YoY
Workers came out ahead in every month of 2019: wages grew 3.0–3.6% while consumer prices rose 1.5–2.3%.
Frequently Asked Questions
Why does the Fed care so much about wage growth?
Because wages are the biggest cost for most businesses. When pay rises faster than productivity, businesses raise prices to protect their margins, and that feeds inflation. On this site's record (from 2007 to September 2025), every month with wage growth above 4% — all of them in 2020–2025 — was followed by inflation above 2% a year later (50 of 50), though that is one inflation episode. Over the whole record, though, prices have led wages rather than followed them: the fit is closest with CPI running a few months ahead.
What is the difference between nominal and real wage growth?
Nominal wage growth is the raw increase in pay (say +4%). Real wage growth takes inflation out: if pay rises 4% but prices rise 5%, real wages fall by 1% — workers lose purchasing power despite the raise. Real wage growth = nominal wage growth - CPI inflation. In 2021-2022, even with pay rising 5-6% a year, real wages fell in 21 of those 24 months because prices rose even faster.
What wage growth is consistent with 2% inflation?
Roughly 3-4% a year is consistent with 2% inflation, assuming productivity grows 1-2% a year. The logic: if workers produce 2% more each year, businesses can pay 2% more without raising prices. Add the 2% inflation target and you get about 4% as the most wage growth that fits. Above that, pay outruns productivity and the difference shows up in prices.
Why was wage growth so high after COVID?
Three things at once. (1) Severe labor shortages, as workers left the workforce during COVID and were slow to come back. (2) Businesses bidding hard for scarce workers. (3) Huge fiscal stimulus, which gave workers a cushion to hold out for higher pay. Together they produced the fastest wage growth on the site's record (from 2007) apart from the 2020 layoff distortion (8.1% in April, 6.6% in May): 5.9% in March 2022.
At what wage growth rate does the Fed consider inflation risks to be contained?
Roughly 3.0–3.5% a year. That is the pace the Fed sees as fitting 2% inflation, assuming productivity grows about 1.5%. Wage growth that stays at 4.5% or above is seen as inflationary, because businesses pass higher labor costs on to their prices. Where the current reading sits against this range is one of the things the Fed weighs when deciding whether to hold, cut or raise rates.