Jul 12, 2023 - Economy

Wages are finally rising faster than inflation

Data: Bureau of Labor Statistics; Chart: Axios Visuals
Data: Bureau of Labor Statistics; Chart: Axios Visuals

Americans' paychecks have gotten bigger in the last two years, but not enough to keep up with inflation. Now, lower inflation means the average worker is seeing rising purchasing power.

By the numbers: Real average hourly earnings are up 1.2% in the 12 months ended in June, the Labor Department said Wednesday following the release of the latest inflation data.

  • It had ticked higher in May, but before that had been in negative territory for nearly two years, as workers' raises were not enough to keep up with sky-high inflation.
  • For production and nonsupervisory workers, that number was even stronger, with a 2.2% year-over-year gain in real average hourly earnings.

State of play: The question now is whether the labor market will be strong enough to keep real wage gains coming as inflation continues to diminish — potentially enabling workers to catch up with some of the real purchasing power their paychecks lost in 2022.

  • The swing into positive real earnings might explain why some evidence points to public opinion about the economy improving in June.

Yes, but: Continued real wage gains depend on which happens faster: falling inflation rates or a softening labor market, leading to smaller raises for workers.

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