The median weekly earnings of full-time wage and salary workers were 6.1% higher in the first quarter of 2023 compared to the same period a year earlier, the Bureau of Labour Statistics said in a report. Inflation during that time ran at 5.8%. — Bloomberg
NEW YORK: US workers are starting to see pay gains run faster than inflation, amplifying their purchasing power and giving the US Federal Reserve (Fed) reason to raise interest rates again next month.
The median weekly earnings of full-time wage and salary workers were 6.1% higher in the first quarter of 2023 compared to the same period a year earlier, the Bureau of Labour Statistics said in a report. Inflation during that time ran at 5.8%.
The data signify that Americans may be finally starting to stretch their dollars further, as wage gains have generally lagged inflation over the past two years.
Price pressures have been cooling somewhat, but companies are still raising pay to attract and retain a scarce supply of workers.
While that may bode well for consumer spending, it’s potentially worrisome for the Fed as they try to curb demand across the economy to tame price pressures.
That may incline policymakers to lean towards another hike at their May meeting.
However, when looking at wages unadjusted for inflation, the gains are losing steam from one quarter to the next. Earnings rose 2.1% in the third quarter of 2022, followed by 1.3% at the end of the year and 1% to start 2023.
Pay gains differed among demographic groups. While White, Asian and Hispanic Americans experienced positive real wage growth to start the year, black Americans’ pay gains lagged behind inflation. Women’s earnings kept up with rapid price growth, while men’s fell behind.
What’s more, women’s earnings climbed to 84% of men’s, hovering near a record dating back to 1979.
Other data also showed compensation is regaining momentum. The Atlanta Fed’s wage growth tracker rose 6.4% in March, the first acceleration in five months. — Bloomberg
