Hopes for strong wage growth in the jobs report for June were dashed Thursday, as the Bureau of Labor Statistics reported that average hourly earnings were flat at $24.95 and up just 2 percent on the year.
After years of weak wage growth following the recession, many analysts have seen signs in recent data that earnings may be picking up. But June's data represented a step backward.
At 2 percent annually, earnings growth is well below the 3 percent to 4 percent Federal Reserve chairwoman Janet Yellen has said would be healthy. Goldman Sachs has placed the number consistent with a healthy economy at 3.5 percent.
Just this Tuesday, Federal Reserve vice chairman Stanley Fischer said that "we are seeing tentative indications of an acceleration in labor compensation."
May's jobs report showed the highest annual earnings growth of the recovery, at 2.3 percent.
Furthermore, ahead of Thursday's setback, the Employment Cost Index, a separate gauge of worker compensation produced by the Bureau that includes benefits and salaries, was up 2.7 percent in the first quarter, the strongest of the recovery.
One silver lining of Thursday's report is that low inflation driven by low gas prices has boosted workers' purchasing power in recent months. Prices were unchanged from a year earlier in June, according to the Bureau of Labor Statistics' Consumer Price Index, well below the Fed's long-term 2 percent target.
Two percent nominal wage growth with no inflation represents the same increase in real wages as 4 percent percent nominal wage growth with 2 percent inflation.
Nevertheless, the lack of stronger nominal wage growth in June's report will come as a disappointment to the Fed.