US Low-Wage Workers See Wage Inflation Ease... Retailers Also Face Sales Impact

Low-Wage Workers in Leisure and Accommodation Sectors
Hourly Wage Growth Rate Declines
US Unemployment Rate Hits Highest in 21 Months

The overheated U.S. labor market showed signs of slowing down as of last month, resulting in a slowdown in wage growth for low-skilled, low-wage workers. As the wage growth of low-wage workers, who are the main drivers of consumption, slows, retail businesses are expected to face challenges. Furthermore, there are forecasts that the impact of the economic slowdown on low-wage workers will become more significant.

According to the U.S. Department of Labor, the average year-over-year hourly wage growth rate for workers in the leisure and hospitality sector was 4.5% last month, a decrease of 0.3 percentage points compared to the same period last year. The growth rate at the beginning of the year was as high as 7%. The wage growth rate for leisure and hospitality workers is a representative indicator used to track wage trends among low-wage workers.

Statistics from the Federal Reserve Bank of Atlanta also captured the slowdown in wage growth among low-wage workers. The wage growth rate for low-wage workers, which was recorded at 7.2% year-over-year as of January, dropped to 5.9% last month. During the same period, the average wage growth rate for all workers also slowed by 0.5 percentage points from 6.3%, but the decline was more pronounced among low-wage workers.

Since the COVID-19 pandemic, the U.S. labor market had been hot due to corporate hiring expansions, but recent signs of cooling have led to a slowdown in wage growth for low-wage workers. Last month, the U.S. unemployment rate reached 3.9%, marking the highest level in 21 months. Additionally, nonfarm payroll employment increased by 150,000, falling short of market expectations of 170,000, indicating that the labor market is beginning to slow down significantly.

As wage growth for low-wage workers slows, retailers are concerned about a hit to their sales. There are also analyses suggesting that consumer spending is already visibly declining. Last month, Chris Kempczinski, CEO of McDonald's, explained during the Q3 conference call that "the share of consumption by low-wage consumers earning less than $45,000 annually has decreased compared to the same period last year."

Mary Dillon, CEO of Foot Locker, a U.S. footwear manufacturer, analyzed in August that "the difficulties facing the macroeconomy are much more clearly reflected in the impact on low-wage workers during the second quarter." U.S. apparel company Gap also reported that sales of its low-priced brand Old Navy have declined due to reduced spending by low-wage workers.

Some express concerns that low-wage workers may face greater damage from the economic slowdown. During the COVID-19 pandemic, low-wage workers were able to increase their savings through government subsidies. However, with the end of the pandemic, they no longer benefit from large-scale economic stimulus payments, which could lead to economic hardship.

Ellis Gould, chief economist at the Economic Policy Institute in the U.S., stated, "Because U.S. low-wage workers have very limited asset holdings, they will suffer severe damage if the economy slows down."

This content was produced with the assistance of AI translation services.