US Pay Rises Forecast to Shrink as Inflation and Worker Demand Ease

Wage Growth Declines Amid Changing Labor Market

The forecast for US pay rises is set to shrink as inflation diminishes and worker demand eases. According to consulting firm Gallagher, average wages across all industries are expected to grow an average of 3.6% in 2025, down from 4% in 2024.

Kevin Talbot, Gallagher’s national managing director, notes that after a spike in pay increases in 2022, employers are returning to more standard practices. With US job openings hitting a three-year low at 7.7 million in July, businesses feel reduced pressure to offer large raises to retain employees.

A shift in bargaining power between employers and employees has led many companies to tighten their belts concerning salary increases. Talbot explains, “Employers are now able to demand more from their workers, pausing on the generous offers from the previous years.” This trend aligns with a notable decline in pay growth, as reported by Gusto’s economist Tom Bowen.

• Employers are revisiting salaries amid a more balanced power dynamic in the labor market.
• Healthcare costs are taking a toll on remuneration budgets, compelling more conservative raises.
• Employees are showing less inclination to challenge reduced pay rise expectations due to fewer job opportunities.

Current Wage Trends

The average wage growth in the US has reached 23.3% since the pandemic began, outpacing the 21.2% rise in consumer prices. Nonetheless, the pace of raises is moderated as employers adjust to a changing economic landscape. Employers must navigate tricky conversations when addressing pay with high-performing employees,\ noting the sentiment shared by Johnny Taylor, CEO of the Society for Human Resource Management.

Despite these trends, certain sectors, particularly healthcare, continue to budget for higher pay increases driven by demand for specialized skills. However, a general tightening can be expected moving forward.