American workers are running to stand still. In May, average hourly earnings rose 3.4% from a year earlier, while consumer prices climbed 3.8% — leaving real wage gains limited.
Purchasing power squeezed
With prices rising faster than pay, households are feeling the pinch even as nominal wages grow. Consumer spending has moderated as purchasing power is squeezed, a drag on the broader economy.
A delicate balance
Over a longer horizon, wage growth has at times outpaced inflation, but the recent gap highlights how persistent price pressures erode living standards. The dynamic helps explain sour consumer sentiment despite a still-solid jobs market.
Source: U.S. Bank.