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 increased only 3.1%, per BLS data released Friday, leaving real wages down 0.3% from a year earlier and down 0.1% from July.
- Heather Long, chief economist at Navy Federal Credit Union, said the reversal began this spring after a stretch from May 2023 to roughly April 2024 when wage growth had generally exceeded inflation, noting "things were getting better, and now that improvement has blown up."
- Gasoline prices rose 3.9% in August alone, accounting for more than one-third of the CPI's monthly gain, while diesel touched $6 per gallon for the first time amid fuel supply disruptions tied to wars in Iran and Ukraine.
- Navy Federal's internal spending data covering about 15 million members shows consumers migrating from Whole Foods to Costco and Aldi — a shift Long says is appearing "almost across the income spectrum."
- YouGov survey data reinforces the split: higher-income shoppers gravitate to Costco for groceries while Walmart Supercenter is the preferred store for middle- to lower-income households.
- Long projected the best-case scenario as inflation and wage growth converging again around early 2027, but warned that even parity "is still going to feel pretty miserable on Main Street," given elevated overall price levels.
Why it matters: With consumer spending driving roughly two-thirds of U.S. economic activity, the 0.3-point gap between inflation and wage growth is already pushing a retail migration from Whole Foods to Costco and Aldi across income levels. Energy — fueled by wars in Iran and Ukraine — is the lever, and Long sees no quick relief before 2027.
Ask SkimNews
