Economic Progress

As inflation overtakes wages, Americans are working more for less

Russia's invasion of Ukraine has severely impacted fuel and food prices, turning inflation into a global crisis.

Russia's invasion of Ukraine has severely impacted fuel and food prices, turning inflation into a global crisis. Image: Unsplash/ Allef Vinicius

Felix Richter
Data Journalist, Statista
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Economic Progress

  • Consumer prices continue to rise in America despite the Fed's most aggressive rate hike in decades.
  • Russia's invasion of Ukraine has severely impacted fuel and food prices, turning inflation into a global crisis.
  • Inflation has been outpacing nominal wage growth in the US for 18 months now, resulting in a 3% decline in real hourly earnings, as this chart shows.

Despite the Fed’s most aggressive rate hikes in decades, consumer prices continued to climb in September, adding to fears that inflation and higher interest rates are here to stay. According to the U.S. Bureau of Labor Statistics, consumer prices climbed 8.2 percent over the last 12 months before seasonal adjustment, barely down from 8.3 percent the previous month.

Low interest rates, Covid-related supply constraints and strong consumer spending partly fueled by generous stimulus checks had already put upward pressure on prices before Russia’s invasion of Ukraine. The war’s severe impact on fuel and food prices has further fanned the flames, turning an inflation scare into a global crisis.

As the following chart shows, inflation has now been outpacing nominal wage growth for 18 months straight, meaning that Americans can afford less than they could a year ago, despite wages rising on paper. While average hourly earnings climbed 5.0 percent from $30.92 to $32.46 over the past 12 months, consumer prices soared 8.2 percent on a seasonally adjusted basis, resulting in a 3-percent decline in real hourly earnings.

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 is at the very top of many Americans’ list of concerns.

Inflation has now been outpacing nominal wage growth for 18 months straight.
Inflation has now been outpacing nominal wage growth for 18 months straight. Image: Statista
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