July 2025 Wage Increase Report: Inflation Rise Is Being Surpassed, Yet Not Universally for All Workers
In a recent economic update, it has been reported that wage growth, as measured by the Indeed Wage Tracker, cooled in June 2025, standing at 2.9% year-over-year. This slowdown is attributed to various factors, including increased demand and the strong influence of digitalization and AI in professions like software development and medicine, which drive higher salary increases.
On the other hand, traditional fields like electrical engineering, law, and marketing are facing slower growth. Regions like Bavaria, with their tech advancements, are showing higher pay trends, highlighting the sector-specific wage dynamics at play.
Despite this cooling, overall wage growth remains healthy and above inflation. In fact, in June 2025, 57% of American workers saw their paychecks grow faster than inflation, a percentage similar to 2020 and much improved from a low of 44% in 2022.
The gap between wage growth and inflation is the narrowest it's been in 12 months, raising concerns about an impending tariff-driven rekindling of inflation. Not every American is experiencing the same boost in purchasing power, and many may not be seeing any boost at all amid these fears.
Historically, much of the rise in posted wages that began in 2021 came from a massive surge in wages for low-paying roles. However, over the past year, the opposite trend has been true, with posted wages in typically higher-paying jobs growing fastest.
In June 2025, electrical engineering jobs had the highest-than-average annual advertised pay growth of 6.3%. Legal and marketing followed, with both recording 5.1% posted pay growth rates compared to last year.
It's worth noting that not every American is benefiting equally from this wage growth. The labor market is solid, but its benefits are not being shared equally across the economy, with a sizable share of workers falling behind.
The Bureau of Labor Statistics' Employment Cost Index (ECI) and the Wage Growth Tracker published by the Federal Reserve Bank of Atlanta have also shown similar patterns in recent years, although at more muted levels.
In a "normal" market, wages should typically grow at least somewhat faster than the pace of inflation to keep paychecks in line with rising costs of living. However, the rapid pace of wage growth seen in the early post-pandemic period has slowed significantly, with the Indeed Wage Tracker's annual growth pace declining from a peak of 9.4% in January 2022.
Data from the Job Postings Index, which stood 4.5% above its pre-pandemic baseline as of July 18, and the Indeed Wage Tracker (including sector-level data) can be accessed on the data portal.
Low- and middle-wage jobs have seen more modest pay gains at or below the pace of inflation, but are showing signs of stabilization. Despite a pullback in high-wage pay growth, several job titles in that category are still posting strong gains. In June, they accounted for every spot in the top five list of categories with the fastest growth since last year.
The gap between wage growth and inflation, albeit narrow, is still a positive sign for workers. As we move forward, it will be interesting to see how these trends continue to evolve.
