WSJ "US Inflation Causes Negative Real Wage Growth... Adversely Affects Consumption"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] The Wall Street Journal (WSJ) reported that the rising inflation rate in the United States is outpacing wage growth, negatively impacting consumer spending.

According to the U.S. Department of Labor on the 17th (local time), the monthly real wage income growth rate adjusted for inflation (compared to the same period last year) has fallen below zero since March of last year and has continued its negative trend to date.

Accordingly, the most recent data showed that the nominal wage income growth rate, not adjusted for inflation, was 4.2%, but on a real basis, it dropped to -4.4%.

Earlier, in April and May 2020, wages rose sharply by more than 7% during the early stages of the COVID-19 pandemic.

Combined with low inflation and reduced spending, the financial situation of employed Americans improved. Over the past year, nominal wage income increased by more than 4% monthly, surpassing pre-COVID-19 growth rates.

However, WSJ analyzed that the effect of wage increases disappeared due to inflation soaring to the highest level in over 40 years, which also affected consumption.

Although consumption increased over the past year, real consumption adjusted for inflation decreased. WSJ explained that while nominal spending rose due to price increases, actual consumption declined.

For gasoline, one of the items with the highest price increase, prices rose by 60%, but gas station sales increased by only 50%. While outward sales appeared to increase significantly, actual driving and travel by Americans decreased.

WSJ pointed out that monthly retail sales have increased by about 30% compared to pre-COVID-19 levels since early last year, but the real growth rate adjusted for inflation was only about 15%, indicating that despite wage increases and spending growth, actual consumption by Americans has remained largely unchanged.

This content was produced with the assistance of AI translation services.