Report: Hourly Wages Outpace Inflation for 1st Time Since 2021

For the first time since 2021, consumers’ wages are exceeding inflation.

A report Monday (July 17) by The Wall Street Journal (WSJ) notes that inflation-adjusted average hourly wages increased 1.2% in June compared to a year earlier, per U.S. Labor Department data.

The increase was the second consecutive month of seasonally adjusted gains following two years in which employee raises were overshadowed by rising prices. As the WSJ notes, if this trend continues, it could help boost spending and stave off a recession.

The report says raises for lower income workers were especially strong in the earlier part of the year as the hospitality sector boosted hiring, while wages in the manufacturing and business-services spaces are also surpassing inflation.

“I don’t see inflation right now as being the problem it was many months ago,” Amy Silverman, a Brooklyn psychotherapist, told the WSJ. “I really feel like the ups and downs financially, it sort of evens out.”

She said she had seen prices stabilize in recent months after witnessing a rise in food prices. Her psychotherapist job is also relatively new, leaving her on stronger financial ground.

The Consumer Price Index, as released last week by the Bureau of Labor Statistics (BLS), showed that prices rose 3% overall last month, measured annually, and a marked deceleration from the 4% recorded in May and the peak of 9% from roughly a year ago.

“There will of course be much speculation about whether and when the Federal Reserve might keep raising rates, possibly as soon as this month,” PYMNTS wrote recently. “And it should be noted that the 3% pace is still above the 2% stated inflation target set forth by the Fed.”

Still, that report noted, a closer look at the data shows several key metrics that suggest a relief from high prices, particularly among staples like food, where prices were flat for groceries in June, and just two of the six major grocery store food group indexes rose over the month prior.

Restaurants are a different story. Prices there continue to climb, leading bigger earners to skip dining out, often because of tipping, as PYMNTS research has found.

“Connected Dining: Inflationary Pressure Squeezes Restaurant Tips” found that people who make more than $100,000 a year are more likely than those in other income brackets to say that the expectation to leave a tip makes them eat at home more frequently.

According to the study, 32.4% of high-income consumers agreed to this statement, compared to the 32.1% of those who earn $50,000 to $100,000 a year and 27.7% of those who earn under $50,000 that said the same.