Real Wages Rise Again as Wage Growth Outpaces Inflation

After 25 consecutive months of declining real wages in the United States, nominal wage growth finally caught up with inflation in May 2023, ending two years of effective pay cuts suffered by American workers. When inflation began to flare up in April 2021, the year-over-year increase in consumer prices started outpacing nominal wage growth for private nonfarm employees in the U.S., meaning that, accounting for the rising cost of living, Americans were earning less than they were a year earlier.

Despite making more money on paper - nominal wages continued to grow throughout the crisis - Americans were able to afford less than they were before. As anyone who has ever taken a pay cut knows, there are few things more discouraging than putting in the same amount of work in for less money, which is why it’s understandable that inflation has been at the very top of many Americans’ list of concerns for the past two years.

And while real hourly earnings have now grown for five consecutive months, it'll take a while for American workers to feel that their wages are increasing. In terms of constant 1982-1984 dollars, U.S. employees on private nonfarm payrolls made $11.02 an hour in September 2023, virtually the same as they did in February 2020, just before Covid-19 hit.