Over the past year, Americans have experienced a significant boost in their buying power, thanks to falling inflation and a robust job market. This comes as a welcome change for many households that have struggled to keep up with everyday expenses.
Real Wage Growth: A Year of Progress
From May 2023 to May 2024, the average private-sector worker in the U.S. saw their real hourly earnings increase by 0.8%. This trend of growth in annual real earnings has been ongoing since May 2023, benefiting rank-and-file workers in non-managerial roles the most.
The labor market has been particularly strong as the U.S. economy reopened from its pandemic-induced lull. Job openings hit record highs, and unemployment remained near historical lows, allowing workers to find higher-paying opportunities with ease. In March 2022, for example, job openings soared to over 12 million, a stark increase from the pre-pandemic level of around 7 million. The average worker also saw their pay growth spike to about 6% annually, a significant rise compared to the pre-pandemic raises never exceeding 4%.
A Reversal in Inflation and Sustained Wage Growth
Fortunately, inflation has eased since the pandemic and the labor market remains robust. As a result, average nominal pay (before adjusting for inflation) for all workers has surged almost 23% to $34.91 an hour since January 2020. For rank-and-file employees, pay has grown even faster, exceeding 25% to reach $30 an hour.
The rising buying power of Americans, driven by falling inflation and strong wage growth, marks a positive shift for many households. As the economy continues to navigate post-pandemic dynamics, the resilience of the labor market and the easing of inflation are key factors supporting this period of financial improvement for American workers.
