Biden’s America: Inflation Robs All Wage Gains from Americans
What seemed to have been a big jump in the wages of workers in October became just another disappointment after accounting for inflation.
On Friday, the Labor Department reported that the average hourly earnings of workers went up by 0.4% last month, which is within the estimates. Many considered this good news.
However, on Wednesday, the said department that top-line inflation in the U.S for October also went up by 0.9%. This went over what was expected. Many saw this as very bad news.
This meant that all told, real average earnings by the hour, when accounting for inflation, actually went down by 0.5% for October. Therefore, what seemed to be a solid increase in wages was actually a decrease. This comes as another setback for workers who are still struggling to face the effects of the COVID-19 pandemic.
According to Natixis’ chief economist for the Americas Joseph LaVorgna, “For now, inflation is going to continue to run above very solid wage growth. This is why when you look at consumer confidence, it’s really taking a beating. Households do not like the inflation story, and rightly so.”
It is true that even though consumer confidence increased from the lows experienced during the pandemic, particularly in since 2020 and for a year after, this has gone down substantially as it coincided with the highest pace of inflation in more than 30 years. The index of consumer sentiment for August that was done by the University of Michigan slumped to its lowest in almost 10 years.
However, wages have swelled during that time period as the average hourly earnings went up by 4.9% year over year last month. But compared with inflation, real hourly wages have actually gone down by more than 1.2% during the same period, per the Labor Department.