For the first time since April 2021, wages for American workers have started rising in real dollar terms on a year-over-year basis, thanks in large part to the decline in inflation.
“With inflation finally cooling, workers’ wages are now rising faster than prices,” The Washington Post’s Jeff Stein wrote Thursday. “For most of Biden’s administration, inflation rose faster than earnings, meaning most Americans were getting poorer even as the economy grew and unemployment fell.”
The positive trend, which is only two months old at this point, could have something to do with the recent improvement in consumer sentiment, which showed significant improvement in July in a widely cited University of Michigan survey. Although it’s too soon to say for sure, the better consumer mood could show up in attitudes toward President Joe Biden, whose efforts to sell “Bidenomics” to American voters haven’t yet translated to stronger poll numbers.
Biden on Thursday again highlighted the economic progress made over the last year. “The U.S. has the lowest inflation rate of any major economy in the world — the so-called G7. It’s less than two thirds of what it was a year ago — down from 9% to 3% — and going to go down lower,” he said in a speech at the Philadelphia Shipyard. “At the same time, pay for low-wage workers has gone up at a faster pace in over two decades. Wages are growing faster than inflation. That means a lot of working folks are beginning to be able to have just a little bit of breathing room.”
As wages “start to make up for the huge amount of ground that was lost, I would expect people to be more optimistic about the economy,” former Obama administration economist Jason Furman told Stein. “If this holds up, it would be helpful to the president politically.”
