Americans’ pay gains rose faster than expected so far this year

During the first quarter of 2024, American workers experienced faster-than-expected pay increases, as reported by the Employment Cost Index (ECI), which rose by 1.2%. This development is concerning for the Federal Reserve, which is monitoring wage gains closely due to their potential to fuel inflation.

Despite this increase, real wage growth adjusted for inflation was only 0.8% annually. The ongoing strength of the labor market, evidenced by robust job growth across various sectors and low layoffs, continues to support consumer spending despite persistent inflation concerns. Meanwhile, consumer confidence has dipped, influenced by rising food and gas prices and worries about future labor market conditions.