U.S. regional wage growth returns to normal levels: survey

VIRGINIA, UNITED STATES — Wage growth across the Fifth Federal Reserve District returned to prepandemic levels in early 2026, with manufacturers reporting 3.3% annual pay growth and the share of firms citing labor as a top concern near its lowest level since the pandemic-driven surge began in 2021.

Fifth District wage growth converges on prepandemic norms

A Federal Reserve Bank of Richmond survey analysis found that regional firms across manufacturing and non-manufacturing sectors have converged on prepandemic wage growth rates after three years of elevated pay pressure following the COVID-19 pandemic.

The Richmond Fed analysis identified manufacturers reporting 3.3% realized annual wage growth in February 2026, down from the 5.6% pace recorded during the 2021 to 2023 period, which the Richmond Fed describes as a return to prepandemic levels.

Non-manufacturers reported 3.0% realized wage growth in the same month, with 60% of surveyed firms expecting wage growth at normal levels and only 21% anticipating above-normal increases.

Skilled trades maintained longer-lasting wage pressure, with the Richmond Fed survey noting that one auto mechanic in the Fifth District reported the firm “offered an average wage close to $100,000 to attract workers.”

September manufacturing survey shows wages resilient despite output softness

The Richmond Fed’s September 22, 2026 manufacturing survey found its wages index for the Fifth District at 23.67, maintaining positive growth territory even as the composite manufacturing index fell to negative 2 from 4 in August.

The September employment index rose to 7 from negative 2 in August, indicating that manufacturers in the region continued to add workers even as shipment and new order volumes contracted.

The combination of a positive wages index and a recovering employment index suggests that Fifth District manufacturers are sustaining labor investment through a period of softening output conditions.

The return to prepandemic wage norms across the Fifth District signals a structural shift in United States domestic labor costs that has direct implications for offshore outsourcing and business process outsourcing (BPO) providers competing for enterprise clients with operations-intensive delivery needs.

When enterprise buyers reassess the cost structure of their domestic United States operations in a period of normalized wage growth, top BPO companies worldwide with competitive offshore wage structures are positioned to offer a durable cost advantage that elevated pandemic-era pay rates had partially compressed.

The Richmond Fed analysis confirms that Fifth District wage growth has realigned with prepandemic norms after three years of elevated labor costs, with labor concerns retreating from 20% to 10% of manufacturer survey comments.

For enterprise buyers reassessing the cost of domestic United States operations, normalized wage growth recalibrates the comparison point without closing the structural savings available through offshore staffing.

BPO operators with competitive offshore wage structures and predictable compensation frameworks are positioned to sustain their cost advantage as domestic United States labor markets return to pre-2021 baselines.

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