SALEM — Oregon paychecks appear to be getting a boost this summer, with tax withholdings up around 5% last month compared to July 2022.

Taxes withheld from paychecks are a rough proxy for overall wage growth and employment levels. Withholdings fell sharply early in the pandemic and then soared as Oregonians went back to work.

More recently, wage growth appeared to cool off considerably last winter. Withholdings were up less than 2% annually in February, according to data from the Oregon Department of Revenue.

That appeared to indicate that Oregon’s labor market was finally loosening up and employers felt less need to raise wages to attract and retain workers, notes state economist Josh Lehner in a recent analysis.

The slowdown in withholding coincided with a decline in job vacancies. The Oregon Employment Department says the state had 69,000 job vacancies last spring, according to the Oregon Employment Department, down from more than 100,000 in 2021 and 2022.

The cooler withholding numbers also coincided with layoffs and pay cuts at Intel, Oregon’s largest corporate employer.

The slowdown didn’t last, though. Lehner reports that tax withholdings have picked up this summer. Higher wages are generally good news, but if the labor market is tightening again, that might not be so good.

“The difference between a cooling economy and a reaccelerating one matters quite a bit,” Lehner wrote.

Rising wages and a tight labor market could reignite inflation, the bane of consumers over the past two years. And that might in turn prompt the Federal Reserve to implement fresh interest rate hikes, risking higher unemployment rates and renewing the prospect of a recession.