Oct 31, 2018

Wages rise, but so does inflation

A construction worker protests with his fist in the air

In New York, in May. Photo: Drew Angerer/Getty Images

U.S. workers saw their largest year-on-year wage increase in a decade, but it was still too small — and inflation too high — to signal a clear break from the long period of income stagnation.

What's happening: For almost a decade, weak wage growth has defied the economic recovery and has bedeviled workers. But wages and salaries grew 3.1% year-over-year in the third quarter. That was larger than the 2.5% increase in inflation, but still not a lot, economists say.

  • "Real wage growth is almost nil during the last year," says Laurence Ales, an economics professor at the Tepper School of Business at Carnegie Mellon University. "The Federal Reserve forecasts a stable outlook for inflation at about 2%. Hence, the real wage gain will remain subdued in the near future."

The bottom line: "A few good quarters doesn’t make up for years of stagnation," Jared Bernstein, former chief economist to Joe Biden and now a fellow at the Center on Budget and Policy Priorities, tells Axios. "What’s remarkable is how long it takes in contemporary economic expansions before people who depend on paychecks vs. portfolios catch a break."

Go deeper