Inflation across the country continues to outstrip workers' incomes. From January to December 2022, the Employment Cost Index (ECI) rose by 5.1%. If we compare this figure to the final inflation rate of 6.5%, it is clear that millions of Americans saw a wage increase canceled out by the high consumer prices recorded last year.
In addition, in the last three months of 2022, the salaries and benefits of almost all employees in the country grew at a slower pace than in the first quarters of the year. The ECI only increased by 1% in the October to December period. This figure revealed a cut in the initial forecast of a 1.1% increase. Kathy Bostjancic, Nationwide's chief economist, stated:
The advance in core private wages and salaries slowed (...) consistent with the deceleration in other wage measures, such as average hourly earnings (...) Benefit costs also rose at the slowest pace in more than a year, allowing the year-over-year rate to fall below 5%, at 4.9%."
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The ECI is a quarterly measure of labor costs that is "considered by policymakers and economists to be among the best measures of labor market inactivity y a predictor of core inflation. The company's management is also a key player in the market, as it adjusts to the changes in the composition and quality of employment."
Largest salary increases: Miami and Seattle
Although wage growth was slow in most parts of the country, there are still some exceptions. In cities such as Miami, there was a 6.8% increase in salaries, well above the national trend. However, it is still below the local inflation rate of 9.9%.
Seattle recorded the second-highest wage increase at 6.2%. However, this increase was also offset by local inflation, which was around 8.4% in December.
Hardest-hit cities: Phoenix and Atlanta
Phoenix was the city with the largest differential margin between wage increases and inflation. In other words, workers were hit the hardest as their income was lower due to higher costs. The city experienced a 5% wage increase, compared to a 9.5% increase in inflation, for a total wage cut of 4.5%.
Atlanta followed, with annual wage growth of 4.8% and an annual inflation rate of 8.1%.
The only significant growth: Los Angeles
The only region where inflation did not outpace wages was Los Angeles. Salaries rose by 5.9%, compared to the local inflation rate of 4.9%, representing an adjusted salary increase of 1%.
