Inflation Outpaces Wage Growth For Over 40% Of Americans

Forbes

3 days ago

Topline
Wage growth for a large swath of Americans is being outpaced by the rate of inflation, according to data from Indeed, which reported people with low- and middle-paying jobs are likely feeling the most pressure.
US Federal Reserve Chairman Jerome Powell has said he would like to wait to see the impact of ... More President Donald Trump's tariffs before making changes to interest rates. (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images) AFP via Getty Images
Key Facts
Purchasing power for 57% of U.S. workers increased last year, according to Indeed, leaving 43% lagging behind the rise in cost of living.
While annual wage growth remains just above the annual rate of inflation, which grew to 2.7% in June, 'the gap between the two is the narrowest it's been in 12 months' Indeed added.
Wage growth has usually remained faster than the pace of inflation during periods of normal market conditions in the last few years, according to data from the Atlanta Fed's wage growth tracker.
As 'jobs at the low-to-middle end of the pay spectrum' are likely feeling the crunch of reduced purchasing power, wages of higher-paying jobs have typically grown the fastest in the past year, though Indeed notes annual growth among those jobs have receded in recent months.
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Contra
Overall wage growth remains 'healthy and above inflation,' Indeed noted, even though many low- and middle-wage jobs have experienced pay increases at or below the pace of inflation.
What Kinds Of Jobs Have The Fastest-Growing Wage Growth Since Last Year?
Jobs in electrical engineering topped Indeed's list of fastest-growing wages with a 'much higher-than-average annual advertised pay growth of 6.3%' Wage growth of electrical engineering jobs was followed by legal (5.1%), marketing (5.1%), project management (4.6%), mathematics (4.5%) and IT operations (4.4%).
What Kinds Of Jobs Have The Slowest-Growing Wage Growth Since Last Year?
Physicians and surgeons led the way in slowest growing wage growth with a 0.8% increase since last year, which was followed by driving jobs (1%). Other slow-growing categories include arts and entertainment (1.2%), software development (1.4%), beauty and wellness (1.6%) and logistic support (1.7%).
What To Watch For
The impact of President Donald Trump's tariff policy on American households. A Yale University report published this month found the president's policy could cost U.S. households an additional $2,400 this year as tariffs may potentially trigger a 1.8% increase in short-term prices for consumers. The tariffs could cause other economic impacts, such as a rise in the unemployment rate and a drop in the U.S. gross domestic product.
Key Background
Low-paying jobs experienced their largest wage gains as the economy charged back from the throes of the COVID-19 pandemic's early days, with annual growth spiking as high as 7.5% in October 2022, according to the Atlanta Fed's wage growth tracker. That rate of wage gains dropped to 3.7% last month. June's 2.7% inflation rate was the highest level since February. Trump has pushed Federal Reserve Chair Jerome Powell to cut interest rates as inflation has approached the Fed's long-term target of 2%, but the Associated Press notes the current inflation figures will 'make it more likely that the central bank will leave rates where they are,' citing Powell's desire to understand the impact of Trump's tariffs before making any moves.
Further Reading
Trump's New Tariffs Could Cost Households $2,400 This Year, Analysis Finds (Forbes)
Inflation Rose More Than Expected Last Month As Trump's Tariffs Raise Prices (Forbes)