The US labor market is experiencing a slowdown in wage growth, with new data indicating that the significant pay increases seen during the pandemic are diminishing for both existing and new workers.

According to the monthly private payroll data released by ADP on Wednesday, workers changing jobs experienced a decline in annual wage growth to 8.4% in October, marking the slowest pace since July 2021. Similarly, those who remained in the same job witnessed an increase of 5.7% in wages, the lowest since September 2021.

Nela Richardson, the chief economist at ADP, stated that there was no dominant industry in hiring last month, and it appeared that the era of big post-pandemic pay increases was coming to an end.

The ADP report also revealed that private employers added 113,000 new jobs in October, falling short of the 150,000 expected by Wall Street economists.

Additional jobs data from the Job Openings and Labor Turnover Survey (JOLTS) released on the same day corroborated the signs of a tightening labor market. The quits rate, a measure of worker confidence, remained at 2.3% for the third consecutive month. The quits rate has historically been a leading indicator for future wage growth, suggesting a potential deceleration in wages based on Wednesday's JOLTS data.

However, not all wage data points are aligned. The Bureau of Labor Statistics reported on Tuesday that the Employment Cost Index rose 1.1% in the third quarter, slightly faster than the 1% gain in the previous quarter. Yet, on an annual basis, wages witnessed a decrease from 4.5% in the second quarter to 4.3%.

The September JOLTS report also indicated that the labor market is striving to achieve a better balance between supply and demand. The report showed 9.55 million job openings at the end of September, a slight increase from August's 9.5 million. Hires remained relatively unchanged at 5.9 million.

Analysts believe these developments could impact the Federal Reserve's decision-making. Oxford Economics lead US economist Nancy Vanden Houten noted that while further rate hikes are not expected from the central bank, risks still incline in that direction. The Fed is awaiting more evidence of slower job and wage growth to ensure inflation remains on a sustainable path.

The Federal Reserve is set to announce its latest policy decision later today at 2 p.m. ET. Attention will also be on the October jobs report, which is scheduled for release on Friday at 8:30 a.m. ET, offering further insights into the labor market and wages.