Inflation is outpacing wage growth again, squeezing Americans’ paychecks — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Consumer prices rose 3.4% year-over-year in August while average hourly earnings grew only 3.1%, leaving real wages down 0.3% from a year earlier per BLS data released Friday
- April marked the turning point — from May 2023 through April of this year, wage growth had generally exceeded inflation before energy costs reversed that progress this spring
- Gasoline prices jumped 3.9% in August alone, accounting for more than one-third of the CPI's monthly gain, with Navy Federal estimating gas rose 21% back in March
- Diesel touched $6 per gallon on Friday for the first time on record, driven by fuel supply disruptions tied to the wars in Iran and Ukraine
- Heather Long, chief economist at Navy Federal Credit Union, called the best-case scenario for inflation and wages to converge again around the beginning of 2027 — 'still going to feel pretty miserable on Main Street'
- Shoppers are trading down across the income spectrum — former Whole Foods customers now buying at Costco and Aldi — as consumer spending, which drives about two-thirds of U.S. economic activity, shows strain
Why it matters: Consumer spending drives roughly two-thirds of U.S. economic activity, and real wages falling 0.3% year-over-year means households head into fall with less purchasing power and growing caution. The fact that downmarket trading is visible 'almost across the income spectrum' — not just among lower earners — signals the squeeze is broader than headline unemployment data would suggest, and with energy prices tied to Iran and Ukraine conflicts showing no relief, Long's timeline of 2027 for any convergence is a long wait for already-stretched budgets.
Ask SkimNews
