Wages are finally keeping up with inflation in the US
Last week, there was a modest respite from surging inflation, as prices rose only 3% compared to the previous year. That was the slowest pace in over two years, down substantially from the 9% surge in June last year.
Can’t keep up
The slowdown in inflation is good news for workers. Indeed, although hourly earnings have generally increased, they haven’t been keeping pace with inflation — until recently.
The latest data reveals that American workers' earnings grew at a healthy rate of 4.2% in the last 12 months, marking the first time in over two years that raises have not been wiped out by soaring prices. Workers in sectors like leisure, hospitality, and manufacturing saw a more pronounced impact, with wages rising relatively faster, while the tech-heavy information sector has seen narrower pay gains — with headlines dominated by rounds of layoffs at big tech companies.
At an individual level, it’s hard to interpret the news as anything but positive, though the data somewhat complicates the Federal Reserve’s upcoming interest rate decisions. Some economists argue that rising wages can lead to further inflation as companies raise prices to offset them, creating another cycle of price hikes.