Wage Growth Patterns in 2025 Show Warning Signs

Wage growth patterns are showing unusual signs in 2025, with workers who stay in their jobs seeing higher wage increases than those who switch jobs. Historically, this trend has only occurred during economic downturns. With hiring slowing and the quits rate dropping, workers' bargaining power has been reduced. Analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY), with an average price target implying 11.4% upside potential.

In 2025, wage growth patterns have shown an unusual trend, with workers who stay in their jobs experiencing higher wage increases than those who switch jobs. This reversal in trend is historically rare and has only occurred during economic downturns. The Federal Reserve Bank of Atlanta data reveals that since February, annual wage growth for job stayers has exceeded that of job switchers [1].

Economists attribute this phenomenon to a weakening labor market. The Atlanta Fed data indicates that this sustained reversal has not been seen since the Great Recession and the dot-com bust in the early 2000s [1]. The labor market's cooling, coupled with high interest rates and economic uncertainty, has led to a decline in job openings and a slowdown in hiring [1].

The quits rate, which measures the rate at which workers voluntarily leave their jobs, has also decreased sharply. This suggests that workers lack confidence in finding better opportunities elsewhere, leading to a situation where job stayers are experiencing higher wage growth [1]. Long-term unemployment is increasing, further exacerbating the issue, as these workers may accept lower wages when they find new jobs [1].

Despite the unusual wage growth trend, the overall labor market remains in relatively strong shape, according to Erica Groshen, a senior economics advisor at Cornell University [1]. However, workers have lost some bargaining power due to the reduced demand for talent and the decline in job openings [1].

Analysts have a moderate buy consensus rating on the SPDR S&P 500 ETF Trust (SPY), with an average price target implying 11.4% upside potential [1]. This suggests that while the labor market is showing signs of weakness, the broader economy remains relatively robust.

In conclusion, the unusual wage growth trend in 2025 reflects a weakening labor market characterized by reduced job openings and a lower quits rate. Workers who stay in their jobs are currently experiencing higher wage growth than those who switch jobs. However, the overall labor market remains in a relatively strong condition.

References:
[1] https://www.cnbc.com/2025/08/22/wage-growth-2025-job-switcher-job-stayer.html