U.S. Wage Growth Slows to Weakest Pace in Four Years

U.S. workers saw their wages rise over the past year, but at the slowest pace in more than four years, raising new questions about the resilience of the world’s largest economy. The Employment Cost Index showed a 3.4% increase in total compensation over the 12 months ending in December, but when adjusted for inflation, real gains fell to just 0.7% .

“The numbers show that paychecks are growing, but purchasing power is barely moving,” said Laura McKinney, a labor‑market analyst in Washington. “Families are feeling the squeeze.”

Quarterly data also signaled a slowdown: compensation rose only 0.7% in the fourth quarter, the weakest advance since 2020 .

At the same time, retail sales were flat in December—typically the most important month for U.S. retailers—falling far short of economists’ expectations for a 0.4% increase. Furniture stores and florists saw declines of 0.9%, while building‑materials retailers posted a 1.2% gain .

“This is a warning sign,” said Heather Long, chief economist at Navy Federal Credit Union. “Consumers are cautious, and that caution is now showing up in the data.”

Despite the slowdown, some economists expect the economy to regain momentum in the coming months, helped by larger tax refunds and last year’s interest‑rate cuts by the Federal Reserve .