Wage Growth Falters as Inflation Outpaces Earnings: Workers Face Purchasing Power Squeeze

Wages Lose Ground to Inflation

In the April jobs report, inflation outstripped wage growth for the first time in three years. When the May jobs report comes out on Friday, we'll find out if that's a trend. Real average hourly wages slipped 0.5% for the month and fell 0.3% annually.

Weak Bargaining Position for Workers

"Workers aren't in a very good negotiating position," said Loujaina Abdelwahed, head of economic research at Revelio Labs. The unemployment rate is at a relatively healthy 4.3%, but there's not much workforce churn. Less movement means fewer opportunities for pay bumps.

Broader Economic Context

"We have thrown water on this economy to try and cool it down," said Ron Hetrick, principal economist at Lightcast. Higher tariffs have also increased economic uncertainty. "That has made the desire to hire much lower than it would've been in '21 and '22".

Critical Jobs Report Expected Friday

April's Job Openings and Labor Turnover Survey comes out Tuesday, followed by weekly unemployment claims Thursday and the all-important May jobs report Friday. That report will include details on how much workers earned, which is notable because back in April, inflation outpaced wage growth for the first time in three years. The May report could confirm whether that was a blip or the start of a trend.

Macroeconomic Implications

How much that matters will depend on how long the current inflation spike lasts, according to Michelle Meyer, chief economist at the Mastercard Economics Institute.