Pay for American workers is lagging inflation — again

In a recent CBS News poll, it was revealed that approximately 75% of Americans feel that their incomes are not keeping up with inflation. This sentiment is further supported by economic data showing a decline in real wages. In April, U.S. inflation increased by 3.8% compared to the previous year, while workers’ pay only grew by 3.6%. This marked the first time since 2023 that consumer prices have outpaced wage growth.

The rising cost of living, particularly driven by soaring gasoline prices, is exacerbating financial concerns for many individuals. The survey conducted by CBS News found that 76% of respondents are worried about their personal finances. Additionally, 64% of respondents described the state of the economy as either “very bad” or “fairly bad.”

Angela Hanks, chief of policy programs at The Century Foundation, pointed out that higher prices across various sectors are putting a strain on consumers’ budgets. Surging energy prices, which accounted for 40% of the April inflation spike, have contributed to the overall increase in prices. Gasoline prices, in particular, rose by over 28% compared to the previous year. Economists also attribute the recent inflationary pressures to steeper U.S. tariffs on imports.

Former Federal Reserve Chair Jerome Powell acknowledged the impact of higher energy prices on inflation, noting that it could lead to a temporary uptick in overall inflation. The uncertainty surrounding the Iran conflict further complicates the outlook for inflation.

The burden of these rising costs is being felt by consumers, who are facing challenges in maintaining their spending habits. Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities, expressed concerns about the potential impact on economic growth if consumers start cutting back on their spending. Consumer spending plays a significant role in driving economic activity, and any significant pullback could have negative repercussions.

As the situation continues to evolve, economists are closely monitoring the effects of inflation on consumers and the broader economy. It remains to be seen how policymakers and businesses will respond to these challenges in the coming months.