US Paychecks Are Outpacing Inflation

US Paychecks Are Outpacing Inflation
© Reuters US Paychecks Are Outpacing Inflation

(Bloomberg) — US workers are starting to see pay gains run faster than inflation, amplifying their purchasing power and giving the Federal Reserve reason to raise interest rates again next month.

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 Labor Statistics said in a report Tuesday. Inflation during that time ran at 5.8%, the BLS said.

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 toward another hike at their May meeting.

Read more: Fed’s Bullard Says Recession Fears Off-Base and Urges More Hikes

©2023 Bloomberg L.P.

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