Inflation outpacing wage growth cuts into US purchasing power

Inflation outpacing wage growth is again reducing the purchasing power of US workers, according to figures CNBC reported from Bureau of Labor Statistics releases. Consumer prices were 3.4% higher in August than a year earlier, while average hourly earnings were up 3.1%, leaving a 0.3 percentage-point gap between the two rates.

CNBC reported that inflation-adjusted average hourly earnings fell 0.1% from July and 0.3% from August 2025. The figures indicate that the average worker’s pay rose in dollar terms over the year, but did not rise enough to match the increase in consumer prices.

The reported August reading follows a reversal that began around April 2026. CNBC said wage growth had generally run ahead of inflation from May 2023 until then. ABC News also reported that annual inflation was 3.4% in July while annual wage growth was 3.2%, describing wages as having trailed price growth since April.

What does inflation outpacing wage growth mean for workers?

Nominal wage growth measures the increase in pay before accounting for changing prices. Real wage growth adjusts pay for inflation. When prices rise faster than nominal earnings, a worker can receive a pay increase and still be able to buy less than a year earlier.

Inflation is measured across a weighted basket of household purchases, so an individual family’s experience can differ according to what it buys. Treasury’s guide to how inflation is measured explains why the reported rate reflects broad price changes rather than the cost of a single product.

Energy was a prominent element of the latest pressure, CNBC reported. Gasoline prices rose 3.9% in August and accounted for more than one-third of the monthly increase in the consumer price index, according to the outlet’s account of the data. Heather Long, chief economist at Navy Federal Credit Union, told CNBC that higher energy costs after the Iran war marked the turning point in the pay-price relationship. That is an economist’s assessment rather than a demonstrated causal finding in the reported data.

Slower wage growth may also reflect labor-market conditions. ABC News quoted Lydia Boussour, a senior economist at EY, who attributed cooling pay gains in part to a softer labor market and more cautious hiring by businesses.

How does the current squeeze fit with longer-term pay gains?

The latest deterioration does not erase all gains since before the pandemic. A CBS News analysis of Census data found that typical full-time weekly earnings reached $1,250 in the first half of 2026, up 38% from before the pandemic, while consumer costs rose 30% over the same seven years. CBS estimated that left roughly $70 more a week in inflation-adjusted spending power, or about a 6% cumulative gain.

Those averages conceal uneven outcomes. CBS found substantial differences by occupation and earnings level. Separate research published by CEPR, using ADP payroll records, found job-changers’ pay gains generally kept pace with inflation in the year they switched employers, while many workers who stayed with one employer lost purchasing power during the 2020-24 period.

This story draws on original reporting from CNBC.