Americans’ Real Wages Fall for 4th Month as 3.4% Inflation Tops 3.2% Pay Growth

1 articles · Updated · The Seattle Times · Aug 18

July prices rose 3.4% from a year earlier, beating a 3.2% gain in hourly earnings and extending the drop in Americans’ inflation-adjusted pay to a fourth straight month.
That squeeze, driven largely by higher energy costs tied to the war with Iran, has hit sentiment: the University of Michigan’s early-August gauge fell, and only 8% of consumers expect income growth to outpace inflation, down from 18% late last year.
Broader household finances are also weakening—real after-tax personal income fell in the second quarter, and the savings rate has dropped as families try to preserve living standards.
Research on pandemic-era inflation helps explain the damage: among workers who stayed with the same employer from 2021 to 2024, 43% saw real wages fall by about 9% on average, with workers 50 and older hit hardest.
The renewed pay squeeze comes as the labor market softens and workers’ bargaining power fades, raising political risk for Republicans ahead of the midterms because voters have historically punished incumbents when purchasing power falls.