Purchasing power of U.S. households increases | Wilnesh News

Americans’ purchasing power has risen over the year amid falling inflation and a strong job market, which could be good news for families struggling to afford everyday purchases.

Ordinary workers in the private sector saw their actual hourly earnings According to the U.S. Bureau of Labor Statistics, the growth rate was 0.8% between May 2023 and May 2024.

“Real” earnings measure the net increase in workers’ wages after inflation. In other words, the average private sector worker received a net pay rise from May 2023 to May 2024, after taking into account price increases for consumer goods and services. Their paychecks buy more today than they did a year ago.

The growing trend in annual real earnings has continued since May 2023, according to the Bureau of Labor Statistics. The data show that the effect is particularly strong for rank-and-file employees in non-managerial roles.

That marks a reversal from April 2021 to April 2023, when inflation soared, outpacing wage growth for the average worker.

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“Last year’s real wage growth was a big step forward for working families,” said Chris Tilley, a UCLA professor and labor economist.

“This means they can buy more while putting in the same amount of work time,” he added. “Alternatively, they could reduce the total time spent doing household chores—for example, from working two jobs to one, or having one worker in a dual-income household work part-time—while purchasing the same amount of products.”

Maximiliano Dvorkin, economic policy adviser at the St. Louis Fed, said that in “normal” times, real income growth tends to be positive.

Economists say, however, that the dynamics of the U.S. economy during the pandemic have tipped that balance.

For one, inflation surged and reached a four-year high in mid-2022.

Meanwhile, the labor market is heating up as the U.S. economy reopens from the pandemic-induced stagnation. Job openings are at record highs, unemployment is near historic lows, and workers With well-paying jobs easily available elsewhere, record numbers of people are quitting their jobs.

For example, job vacancies peaked at more than 12 million in March 2022, compared with about 7 million before the outbreak. That month, ordinary workers saw their salary growth Soaring to about 6% annually. Prior to the pandemic, average increases had not exceeded 4%, dating back to 2007, according to the Bureau of Labor Statistics (BLS).

The average worker is getting higher pay raises than in decades, but the raises are not enough to mask inflation, which peaked at more than 9% in June 2022.

However, inflation has generally cooled since 2022, roughly to pre-pandemic baselines, but has since eased and the labor market remains strong.

“What we observed last year was a return to more normal economic conditions after the disruptive forces of the COVID-19 pandemic abated,” Dvorkin said.

“This is good news for consumers,” he added, because it generally means their happiness improves over time.

The average “nominal” wage for all workers (i.e. before inflation) Woke up Since January 2020, prices have increased nearly 23% to $34.91 per hour. have grown For the average employee, the increase is even faster, rising more than 25% to $30 an hour.

this consumer price indexDuring the same period, a key inflation gauge rose 21%.

Although consumer sentiment has been improveWorkers remain dissatisfied with the U.S. economy. The disconnect between the economy’s overall strength and households’ perceived weakness is known as the “atmosphere concession.”