The “hot” job market is fueling rapid wage growth for millions of Americans, but the worst inflation of the last four decades erodes these gains quickly. The Ministry of Labor said on Friday that the average hourly wages for all workers actually fell by 3% in May from the same month a year ago, taking into account the impact of rising consumer prices. On a monthly basis, average hourly wages fell by 0.6% last month, taking into account rising inflation. With this measure, the typical American worker is actually in a worse position today than a year ago, even though nominal wages are growing at the fastest rate in years. INFLATION SCHEDULE: MAPPING BIDEN ADMINISTRATOR’S RESPONSE TO QUICK PRICE DEVELOPMENT This is because consumers are facing the highest inflation of a generation, which has rapidly reduced their purchasing power. “While wages are rising fast, inflation is rising much faster, so workers are really losing ground,” said Dan North, a senior economist at Allianz Trade North America. “They are actually getting a pay cut and that could certainly put a strain on the economy.” Businesses are willing to hire new employees and increase wages in order to attract employees as they face labor shortages. There were about 11.4 million job vacancies at the end of April – close to a record high – and the number of Americans leaving their jobs has also risen to a new high. An employee bags dried peppers for a customer inside the Grand Central Market, March 11, 2022, in downtown Los Angeles. (Patrick T. Fallon / AFP via Getty Images) / Getty Images) As a result, employees are seeing the biggest payroll gains in years, as companies compete for a limited number of employees. Earnings rose 5.2% in May from a year earlier, according to the Labor Department last week, well above the 3% average before the pandemic. GET FOX BUSINESS IN ENGINE BY CLICKING HERE The combination of high inflation and wage growth has fueled concerns about the possibility of a wage-price spiral, a 1970s-type phenomenon where high inflation leads to wage increases that, in turn, lead to more spending and more expensive prices. A man shopping at a Safeway grocery store in Annapolis, Md., May 16, 2022. (Jim Watson / AFP via Getty Images / Getty Images) Hot inflation has created severe financial pressures for most US households, which are forced to pay more for daily necessities such as food, gasoline and rent. The burden is disproportionately placed on low-income Americans, whose already high wages are heavily influenced by price fluctuations. “Today’s report highlights why I have made the fight against inflation my top economic priority,” Biden said in a statement on Friday, blaming Russian President Vladimir Putin and the war in Ukraine over rising prices. “Even as we continue to work for freedom in Ukraine, we must do more – and faster – to reduce prices here in the United States.”
