| Wage growth has been consistently strong for almost two years. But inflation has grown faster every month during that time.
Why it matters: For families, that means their “real” buying power has been declining for two years. That spells trouble for their budgets.
Big picture: Spending has remained strong because built-up pandemic savings and a large amount of available space on credit cards plugged the gap between wages and inflation. Now, savings and available credit are both falling.
Be smart: Rising inflation-adjusted wages will need to pick up the slack if spending is to continue growing. Inflation needs to come down and wages must grow faster.
- The Fed is working on reducing inflation.
- Rising productivity would boost wage growth. Evolving AI technology could help, as would more business investment.
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