If you've gotten a raise in the past two years, it's now been nearly all eaten away by inflation
Inflation-adjusted average hourly earnings have declined to about the level they were at when President Donald Trump took office for his second term.
If you've received a raise within the last two years, it's now likely been significantly diminished by inflation. The latest statistics show that prices are rising faster than expected, eroding the gains workers have made. In January 2025, the average hourly wage was $35.84, or $37.79 in today's dollars when adjusted for inflation.
However, the average hourly wage remained at $37.81 last month, essentially unchanged over the past 20 months. The Bureau of Labor Statistics' latest Consumer Price Index revealed that prices increased by 3.7% in September, higher than the expected 3.6%. Economists attribute this to ongoing economic challenges, such as the war in Iran, which has driven up prices, including gasoline by 9.1% in September.
Heather Long, chief economist at Navy Federal Credit Union, notes that inflation has eroded almost all wage gains, following the same trend observed during President Trump's first term, where wages grew by over 15% compared to 8% inflation. This discrepancy has led to frustration among households. The University of Michigan's consumer sentiment index dropped to 46.3 in October, down from 71.7 in January 2025.
Higher prices are exacerbating cost-of-living pressures, particularly for middle and lower-income households who spend a larger portion of their income on essentials like gas and groceries. Despite this, some argue that average weekly earnings have grown faster than average hourly earnings, thanks to a slight increase in average hours worked.
However, the outlook remains uncertain, with inflation expected to play a significant role in the upcoming midterm elections.
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