Inflation is slowing and paychecks are rising – so why does life feel so unaffordable?
Americans’ hourly wages are on the rise, but not enough to keep up with inflation. The Bureau of Labor Statistics released its latest data Tuesday, and it shows that while inflation fell 0.4% in June, it’s still enough to essentially nullify any pay increases average Americans may see.
According to the report, June saw an average hourly wage gain of 3.5% compared to the same time last year. But that’s exactly how much inflation went up in the same timespan, after factoring in the 0.4% decrease.
Real average hourly earnings, which measure how much workers can actually spend based on their hourly wages, increased 0.8%, the report said. And while that marks the biggest monthly increase in more than a year, it only amounts to about an extra 30 cents per hour for the average American.
Many workers holding the same job year after year see raises of around 3%. Some get less. Those people fall behind in an economy running at 3.5% inflation.
Not much help
Economic trends
Americans make an average of $37.64 per hour, according to Bureau of Labor Statistics data.
The rise in real average hourly earnings isn’t enough for millions of Americans whose pay isn’t matching or surpassing inflation.
Gas prices are also rising again as the U.S.-Iran conflict resumes after the collapse of the short-lived ceasefire.
“No matter what we see in the averages, there’s going to be a lot of people whose wages are simply not keeping up with inflation,” former Labor Department Chief Economist Betsey Stevenson told The Washington Post. “So they just can’t buy the same bundle of goods that they could have bought a year ago.”
For example, it’s common for workers who stay at the same job year after year to get an annual pay increase of about 3%. But when inflation is consistently outpacing that, it’s hard for even those who have steady jobs to keep up.
How unemployment factors in
Looking for a new job has long been seen as a way to earn more, but even that option is facing challenges.
The current labor market is listless for those looking to make a change. The share of the U.S. workforce that’s quitting their jobs is the lowest it’s been since 2020, the Post reported.
Unemployment has been hovering at around 4.2% for the past couple months, but millions are still struggling to find a job, especially those who have been out of work long-term.
The Bureau of Labor Statistics classifies long-term unemployment as 27 weeks or more without a job. People who fall into that category made up 27.3% of the U.S.’ total unemployment in June. That’s near what it was in 2021 as the U.S. was still recovering from the COVID-19 pandemic.
The political fallout
The inability for many Americans’ paychecks to keep up with inflation comes at a time when a politically divided country is united when it comes to at least one thing: the affordability crisis.
A Guardian/Harris Poll released earlier this month found 95% of Americans believe the U.S. is suffering from an affordability crisis and 57% believe the overall economy is getting worse. And while more Democrats (71%) say the economy is getting worse, Republican sentiment is also trending worse. Thirty-eight percent now say the economy is worsening; up from 22% in February.
The White House blames the war with Iran for the rise in inflation.
“President Trump has always been clear about the fact that oil and gas prices — and thus overall inflation — will rapidly drop as soon as the Iran situation is resolved,” White House spokesman Kush Desai said in a statement to the Post. “Prior to the start of Operation Epic Fury, American workers had recovered almost half of the real wage losses they experienced under Joe Biden thanks to this Administration’s commonsense agenda of deregulation, tax cuts, and energy abundance.”
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Ella Rae Greene, Editor In Chief
