US Pay Growth Slows Amid Inflation, With 40% of Workers Seeing Decline in Real Pay

Over 40% of US workers have seen a decline in their real pay, according to Indeed. The pay growth gap with inflation has narrowed, but middle- and lower-earners are likely to be affected. The fastest wage growth is in higher-paid fields, while lower-paid workers are seeing the weakest pay growth. This marks a reversal from the post-pandemic period when low-paying jobs saw the biggest wage gains.

A recent report from job-search firm Indeed reveals that more than 40% of American workers are experiencing a decline in their real pay, lagging behind the rate of inflation. This trend is likely to disproportionately affect middle- and lower-earners, according to the firm's analysis [1].

Indeed's Wage Tracker data shows that while overall US pay growth is still ahead of inflation, the gap has narrowed to its smallest point in 12 months. As of June, nearly six in ten workers saw their paychecks grow faster than the cost of living, leaving the remaining 40% behind. The data suggests that those with jobs at the low-to-middle end of the pay spectrum are most likely to be affected [1].

The fastest annual rates of wage growth were recorded in higher-paid fields such as electrical engineering, law, and marketing. Conversely, lower-paid workers are experiencing the weakest pay growth, marking a reversal from the immediate post-pandemic period when low-paying jobs saw the biggest wage gains [1].

Some analysts had predicted that the Trump administration's crackdown on recent migrants, who often work in low-paid jobs, would boost wages at the bottom end of the labor market. However, data from the Atlanta Fed's Wage Tracker indicates that this cohort is now seeing the weakest pay growth since 2017 [1].

In contrast, the European Central Bank (ECB) President Christine Lagarde recently stated that the ECB is in a good place because inflation is at 2% and wages are heading in the right direction [2].

The data also highlights the regional disparities in job growth. For example, states like California and Texas have seen significant increases in employment across various sectors, while states like Wyoming and Puerto Rico have experienced slower growth [3].

The implications of this pay decline are significant for both workers and the broader economy. Workers may face increased financial strain, potentially leading to reduced consumer spending and a slower economic recovery. Businesses may also face challenges in attracting and retaining talent, further exacerbating labor shortages.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-24/more-than-40-of-americans-see-decline-in-real-pay-indeed-says
[2] https://finance.yahoo.com/video/lagarde-says-ecb-good-place-132354526.html
[3] https://www.bls.gov/news.release/laus.t03.htm