Job hugging is the new job hopping
Job-hugging is a new form of job-hopping due to the slowdown in the labor market.
For years, many Americans have wondered why their paychecks haven’t kept up with the rising costs of the things they have to buy.
Even though many economists acknowledged a “price crisis” and a “K-shaped economy” benefiting the super-wealthy, analysts were fixated on a more traditional measure of success: that aggregate wages across the economy were not too far below aggregate inflation.
As recently as summer, a Bankrate report predicted that the gap between wages and inflation would finally narrow in 2026, after rising by 4.8 percentage points in 2022.
The employment downturn and, more recently, the Iran war have shut down that speculation.
“We’re not going to see a significant acceleration in wage growth,” Mark Hamrick, senior economic analyst at Bankrate, told USA TODAY. “But inflation will accelerate.”
Have wage increases over the past year kept up with inflation?
Overall, yes.
U.S. consumer prices rose 2.4% for the year in February, according to estimates from the Bureau of Labor Statistics. The agency estimates that average hourly wages rose 3.8% over the same period.
The March employment statistics released by the bureau showed that average hourly wages increased by 3.5% from last year, slowing from the previous month. Economists expect U.S. consumer prices to be much higher in March than in February, mainly due to higher oil and gas prices. We will find out whether these predictions are correct when the BLS Consumer Price Index report is released on April 10th.
State Street Pricestats, which uses web-scraping technology to monitor the prices of consumer products sold online, found that annual inflation rose to 4% in March, the highest level since January 2023.
“The more pricing is done online, the faster retailers can adjust prices… which means that when you get a shock like this, it’s more likely that inflation will pass through faster than before,” said Michael Metcalf, head of macro strategy at State Street Markets. “Wages, on the other hand, might reset once a year if you’re lucky.”
Brian Bethune, an economics professor at Boston University, is looking at the BLS’ March and April Consumer Price Index reports and predicts that rising oil and gas prices will start to affect prices in other sectors.
“There was some optimism earlier this year that the calculation of inflation relative to wage growth would be positive,” Bethune said. “There’s no question that it’s off the table right now.”
Will wage growth keep up with inflation in 2021 and beyond?
Since the beginning of 2021, U.S. consumer prices have increased by 22.7%, while wages have increased by 21.5%, a difference of -1.2%, according to the Bank Rate Report from August last year.
However, some workers’ salaries did not keep up with inflation.
The report found that wages exceeded total pandemic-era inflation in four sectors where the gap was 0.5%, including retail, health and social assistance (1.7%), leisure and hospitality (4.1%), and food services and accommodation (4.8%).
Bethune said there’s a simple answer as to why workers in these industries received higher pay: It’s riskier to keep these jobs during the pandemic.
“To get people into these jobs, we had to pay them more,” Bethune said. “Well, they’re getting paid high enough to close the gap, but that’s only because they’re willing to take risks.”
Sectors whose wages lagged the most behind inflation included manufacturing (-2.5%), professional and business services (-2.8%), financial activities (-3.4%), construction (-3.6%), and education (-4.8%).
Are the rich getting richer?
The K-shaped economy may also be manifested in wage increases.
Wages for middle- and high-income earners grew faster than for lower-wage workers last year, according to data compiled by the Federal Reserve Bank of Atlanta.
As of February 2026, wages for the lowest-paid 25% of workers rose 3.5% year-over-year, and wages for workers rose 4.2% in the second quarter. Workers in the third quartile had the highest annual wage growth rate of 4.5%, while wages for workers in the top quartile rose 3.9% over the same period.
“Right now, there’s a premium being paid for people with fairly advanced technical skills, especially the ability to implement AI,” Bethune said. “All of a sudden, we’re going to be going back to this technology curve that tends to reward certain select individuals with the right education, skills and background.”
Of course, Hamrick said whether an individual receives a raise also depends on several other factors.
“Perhaps more senior leaders will receive pay based on performance, and younger members of the organization may receive a slightly higher salary simply because they started at the lower end of the income ladder,” he said.
Contact Rachel Barber at rbarber@usatoday.com and follow her at X @rachelbarber_
