NEW YORK — U.S. wage growth slowed further in July, with average hourly earnings rising 3.2% from a year earlier, below the latest available inflation rate of 3.5%, according to government data, pointing to weaker growth in workers’ purchasing power as the labor market loses momentum.
Average hourly earnings for private-sector workers increased by 2 cents, or 0.1%, in July to $37.62, the Bureau of Labor Statistics said on Friday. The annual increase was down from a revised 3.4% in June and fell short of economists’ expectations for a 3.5% gain.
The July wage figures came alongside an unexpectedly weak employment report. Nonfarm payrolls fell by 23,000 in July, while the unemployment rate edged down to 4.1%. Employment estimates for May and June were also revised lower by a combined 103,000 jobs, providing further evidence of a cooling labor market.
The latest wage figures do not yet provide a direct comparison with July consumer inflation. The Bureau of Labor Statistics is scheduled to release the July Consumer Price Index on Aug. 12. The most recent available data showed consumer prices rising 3.5% in the 12 months through June.
That means the 3.2% annual increase in July average hourly earnings was below the latest confirmed inflation reading, although the eventual July inflation rate could change the picture of real wage growth.
The slowdown in pay growth adds to signs that labor-market pressures are easing after several years of strong wage gains. The Federal Reserve said in its July Monetary Policy Report that measures of nominal wage growth had edged lower during 2026, while real wage growth had cooled as consumer-price inflation increased.
The weaker wage figures could also influence the Federal Reserve’s assessment of inflation pressures. Slower earnings growth can reduce the risk that labor costs contribute to persistent price increases, although wages are only one factor affecting inflation.
For workers, the relationship between earnings and consumer prices remains central to purchasing power. If prices rise faster than wages, households face a decline in real income unless they adjust spending or receive other forms of income.
The next key measure will be the July CPI report, due Wednesday, which will establish whether consumer prices continued to rise faster than wages during the month.
