Why shouldn't we expect pay raises take a hit at a time like this? The US economy is not growing much, if at all, and in fact is most likely in a recession. There's a strong possibility that inflation in the next 12 months will be well under 2%, and that we may even slip into deflationary environment overall. In a -1 to 1% inflationary environment, we should be happier with a 2.5% increase than with a 5% increase in an 8-10% inflationary environment. If you ask most people, they'd be happier with the second case however.

(I'm hoping my own salary review is completed prior to my boss reading this HN comment, but honestly, if I don't get a merit increase, I'm not going anywhere, so there's relatively little tension to compel them to grant me one.)

I'm not surprised. Regardless of how strong the economy actually is, many people feel it is doing poorly; they expect job losses and pay cuts and will thus be more tolerant of smaller raises. Companies will naturally take advantage of this expectation to save money on payroll and reallocate it to more vital areas. This paragraph was particularly telling:

Meanwhile, workers in the construction, engineering and pharmaceutical industries are projected to see above-average salary increases -- as high as 4.5% in construction and engineering. In addition, research and development professionals can also expect to see increases of about 4.0%.

Without revealing anything I shouldn't, our company has also "taken a hit" on merit increases. As a data point, we have much fewer employees than those polled in the WSJ article.

Here the wsj is sticking to what it knows how to do; talk about big companies. The companies polled regarding raises averaged 21000 workers (13.5 million / 640).