Wage growth has surpassed inflation for a year, meaning households have seen their buying power increase.
That means buying power has increased for the average worker, especially those in non-managerial roles."Real" earnings measure the net growth in workers' wages after inflation. In other words, the average worker in the private sector got a net raise from May 2023 to May 2024, after accounting for price growth in consumer goods and services. Their paycheck today buys more than it did a year ago.
That marks a reversal from April 2021 to April 2023, when inflation spiked and eclipsed growth in the average worker's paycheck."The last year of increases in real wages is a large and important step forward for working families," said Chris Tilly, a professor and labor economist at the University of California, Los Angeles.
However, dynamics in the pandemic-era U.S. economy threw that equilibrium out of whack, economists said.Meanwhile, the labor market was white-hot as the U.S. economy reopened from its pandemic-induced lull. Job openings hit a record high, unemployment was near a historical low, and workersFor example, job openings peaked at more than 12 million in March 2022, up from roughly 7 million before the pandemic. That month, the average worker saw theirspike to about 6% annually.
However, inflation has since eased and the labor market remains strong, though it has broadly cooled since 2022, roughly to its pre-pandemic baseline.
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