The Federal Reserve Board published a staff note assessing what major wage-growth measures reveal about underlying wage inflation and introducing a new model-based indicator intended to strip out compositional shifts and other measurement issues that became more acute during and after the Covid-19 pandemic. The approach combines four wage measures, average hourly earnings, the Employment Cost Index, the Atlanta Wage Growth Tracker, and payroll-based measures from ADP, across 11 broad industries, then applies a hierarchical dynamic factor model to extract wage inflation pressure common across indicators within an industry and common across industries in the aggregate. Using monthly estimates over 2009:M1–2024:M9, the note finds underlying aggregate wage inflation fell briefly at the pandemic onset, rose rapidly and peaked in 2022, then declined toward pre-pandemic levels by the end of the first half of 2024, with the 2024:Q3 average essentially matching 2019:Q4. Sectoral estimates show leisure and hospitality wage inflation returning to its pre-pandemic pace by end-2023 and falling below it in 2024:Q3, while education and health remains somewhat above pre-pandemic levels; the estimated paths align with standard indicators of labor-market tightness at the aggregate and sector level.

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