Wage increases are outpacing inflation, but is that enough?

Wage increases are outpacing inflation, but is that enough?


Wages are higher – so why all the pressure? A look at the market forces, and what it means for retirement. 

Although income has been outpacing inflation, many Americans are still catching up from a historic run-up in prices, including the nearly 55% increase from February 2020 in categories like fuel prices.1 Meanwhile, wage increases leveled off from January to an annualized 4.3% growth rate, down from 4.5% the prior month, according to the most recent U.S. Bureau of Labor Statistics (BLS) employment report.2  

What’s more, according to Empower research, only 11% of workers in the private sector with a retirement plan feel like they’re saving enough for retirement, and more than a third point to pressures they face in making ends meet and inflation for limiting their savings. Over the past year, retirement plan savers also increasingly turned to retirement plan loans and hardship withdrawals (up 14% and 46%, respectively).  

At a macro level, the latest employment data continues to indicate a resilient jobs market. However, it also points to a labor market that is finally starting to show a few more cracks than it has for a long time: The unemployment rate sits at the highest level it’s been for two years.  

A handful of notable takeaways from the March BLS report2

  • Employment growth continues with 275,000 new jobs added in February, exceeding the average monthly gains (230,000) over the past 12 months.  

  • The unemployment rate nudged higher to 3.9%, up 0.2% from January.  

  • December and January revised new jobs were reduced by a combined 167,000. 

  • Wages were up nominally in February (0.1%). 

  • The top three sectors adding jobs included healthcare (67,000), government (52,000), and food services and drinking places (42,000). 

The impact of this month’s jobs report is one to closely watch, as it’s the last one before Fed officials meet mid-March to decide on reducing interest rates. The Federal Reserve is walking a tightrope between supporting a strong economy and taming inflation. Economists expect officials will hold interest rates steady as they await further progress on inflation. 

Women in the workforce

The labor force participation rate for women ages 16 to 64 has jumped from a pandemic-driven low of 69.2% in March 2022 to 72.9% in February 2024.3 A closer look at February’s employment data further reveals that the number of employed women in this age group increased by more than 400,000 over the past year, while the number of employed men declined by more than 350,000.4  

Recent Empower research explores how work factors into the ways women measure financial happiness: Almost half (46%) of female respondents consider not having to rely on anyone else financially “very important.” For older generations of women, that number rises to 52%, suggesting that financial freedom in later life is more important than ever.  

Retirement at 65? Maybe not 

Turning 65 used to be synonymous with retirement. A silver wave of Americans is turning 65 every day – more than 4.1 million Americans in 20245– but this age may no longer be the magic retirement number.  

More Americans are staying in the workforce later in life. Empower research finds that 64% of baby boomers and Gen Xers are open to working indefinitely. And U.S. Bureau of Labor Statistics research projects that 30.2% of 65- to 75-year-olds will participate in the workforce by 2026, up from 17.5% in 1996.6 February’s employment report is trending in this direction, with a labor force participation rate of 23% for Americans 65 years and over. 

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1 CNN, “Inflation is nearly back to normal. But high prices have changed Americans’ lives,” December 2023. 

2 U.S. Bureau of Labor Statistics, “Employment Situation Summary,” March 2024. 

3 U.S. Bureau of Labor Statistics, Labor Force Participation Rate - With No Disability, 16 to 64 Years, Women [LNU01376945], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNU01376945, March 12, 2024. 

4 U.S. Bureau of Labor Statistics, “Employment Situation Summary (Table A-6),” March 2024. 

5 Retirement Income Institute Alliance for Lifetime Income, “Welcome to the Peak 65® Zone – A New Chapter in American’s Retirement Landscape,” January 2024. 

6 U.S. U.S. Bureau of Labor Statistics, “TED: The Economics Daily,” May 29, 2019. 


The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

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