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U.S. wage inflation is getting quieter
6/12/2026
Normalization in leisure & hospitality – a signal for the broader U.S. labor market?
The latest wage data from the U.S. sent an important signal. While the labor market remains robust, wage growth shows no meaningful signs of re-acceleration. Instead, the picture of gradual normalization is being confirmed. At first glance, wage inflation may therefore still appear somewhat sticky – a closer look, however, reveals a more nuanced story.
The leisure and hospitality sector stands out as particularly insightful in this context. As one of the lowest-paying segments of the U.S. labor market, it was especially affected by the disruptions following the pandemic – a key driver of the elevated wage growth during that period. By the end of 2021, year-on-year hourly wage growth in this sector had reached around 13.8%.[1]
These developments can be traced back to the extraordinary imbalances during and after the pandemic. Many workers left the sector temporarily, while demand returned abruptly with the reopening of the economy. At the same time, factors such as early retirement and lower immigration weighed on labor supply. In a segment already characterized by high turnover, this led to particularly strong wage pressures. These effects were further amplified by statistical distortions: the loss of many low-paying jobs temporarily lifted average wages purely mechanically.
Since then, the picture has changed markedly. Workers have returned, demand has normalized, and labor supply has stabilized. Hiring pressures have eased noticeably – reflected, among other things, in declining quit rates – and wage dynamics have also moderated significantly, not least against the backdrop of reduced momentum in job switching and hiring.
A look at the longer-term trend underscores this normalization. Annualized wage growth in this sector averaged around 3.65% in the pre-pandemic period (2016 to end-2019) and has been running at roughly 3.75% since 2023 – effectively the same pace. In our view, this is a clear indication that the labor market is returning to its structural trend.
“Low-wage sectors illustrate particularly clearly how strongly pandemic-related wage pressures were driven by temporary imbalances – and how far this adjustment process has now progressed,” says Christian Scherrmann, U.S. Economist at DWS. “When wage dynamics in a segment such as leisure and hospitality normalize again, this sends an important signal for the broader labor market.”
Precisely because leisure and hospitality had previously been among the most pronounced outliers, this development is particularly meaningful. It suggests that a substantial part of the pandemic-driven wage shock has now been absorbed - even if structural changes may prevent a full return to earlier patterns.
Low-wage sectors tend to respond especially sensitively to bottlenecks and feed directly into services inflation - and thus into a component that is particularly relevant for monetary policy. If wage dynamics are normalizing in this segment, it suggests that a key driver of U.S. wage inflation has lost momentum. This trend is increasingly visible in other labor-intensive service sectors as well. The loudest part of the wage surge has therefore become significantly quieter – even if temporary factors, such as demand supported by major events like the upcoming FIFA World Cup, could still generate short-term impulses in leisure and hospitality. “Under the assumption that oil prices don't increase significantly from here, we expect inflation to top out in the next months,” confirms Scherrmann.
U.S. wage growth in leisure and hospitality back at pre-pandemic levels
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 6/9/26
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