The average hourly wage Americans have earned over the past year has steadily climbed, increasing from $30.76 to $32.36. That spike seems to evaporate, however, when inflation is taken into account. The U.S. Bureau of Labor Statistics (BLS) stated that Americans have effectively experienced a 12-month pay cut of $0.31 per hour. Combined with a decrease in the hours they worked, Americans' inflation-adjusted average weekly pay has decreased by only $13.20 from the previous year.
The BLS released data on September 13, showing that monthly inflation had picked up 0.1 percent, while annualized inflation had soared 8.3 percent. The unexpected data sent markets to tank, with investors forecasting that the Federal Reserve would maintain its aggressive monetary policy as it works to bring down inflation.
High inflation affecting purchasing power of Americans this year
Mark Zandi, the chief economist at Moody's, told NBC News that the high inflation is undermining the purchasing power of Americans. He added that while inflation moderated to 8.3 percent on an annual basis in August, that figure is still higher than the 5.2 percent hourly earnings growth Americans experienced over the same period.
According to current inflation and consumer spending data, Zandi estimates that Americans now spend $460 more each month than they were a year ago to buy the same services and goods.
Most Americans who responded to a Gallup survey released last week said inflation has negatively affected their finances. The situation is even worse among lower-paid workers in the United States.
According to BLS data, while the wage growth of this group has been faster than that of all workers, the inflation rate specifically calculated for that wage-earning group surged 8.6 percent year-over-year in August. That is higher than the 8.3 percent inflation rate among all American consumers.
Jobs remain plentiful for workers in the United States
Josh Bivens, director of research at the Economic Policy Institute, said that if there is any consolation for workers, it is that jobs remain plentiful in the country. He explained that if workers faced inflation with higher unemployment, Americans would have fallen even further behind.
He added that the impact of higher prices on the standard of living of Americans is indisputable. He said that inflation had reduced people's purchasing power, and there are no two ways about it.
The New York Federal Reserve also released a survey on September 12, showing that consumers expect annual inflation to moderate to 5.7 percent by next year. That means wages would have to maintain a 5 percent growth for the next 12 months to beat inflation by that time.
Zandi said the erosion in real earnings would moderate, but real earnings will be stuck in the mud. He added that is something that's going to create a lot of suffering and pain among American consumers.
