By Nathalie Voit
Real hourly earnings declined by 1.7% in the twelve months leading through January 2022, the Department of Labor (DOL) said in an economic news release on Feb. 10.
Real average hourly wages for employees on private nonfarm payrolls dropped from $11.41 on January 2021 to $11.22 in January 2022 as inflation outpaced wage growth. According to federal data, net weekly earnings slid down to $387.06 in January from $399.52 one year ago, a decline of 3.1%.
Soaring inflation is threatening to overshadow households’ gains over the past year. Despite historic wage growth, consumer prices for goods and services have risen at their fastest pace in nearly four decades, the Labor Department reported Thursday.
The Consumer Price Index jumped 7.5% year-over-year in January, its largest 12-month increase since February 1982. Meanwhile, average hourly earnings grew by 5.7% over the past twelve months, near their highest levels in 15 years but not enough to offset inflation, according to DOL data.
Thursday’s dismal news effectively amounts to a 2% cut to workers’ paychecks over the past year.
However, not all workers have fared equal, with workers in the hospitality and leisure sector coming out ahead of workers in other industries.
Workers in the segment reported a 15% increase in average pay compared to one year ago, with the average worker earning $17.08 per hour. Transportation and warehousing laborers’ wages climbed by 9.1%, greater than the 7.5% annual inflation rate.
On average, Americans have to shell out more for the same goods and services compared to one year ago.
Housing costs rose 0.7% month-over-month in January, higher than in December, and the greatest contributor to CPI growth that month. Rents rose by 0.5% from December.
“Not only have home prices jumped 20% in the past year, but now many rents are too, rising 0.5% in the past month alone,” said chief financial analyst at Bankrate Greg McBride, according to CNBC. “Nothing squeezes household budgets more than the outsized increases we’re currently seeing on costs for shelter and rent.”
Everyday staples like food and gasoline have also seen their costs surge over the past year. Food costs climbed 7.0% year-over-year and 0.9% in January. Despite decreasing in January, gasoline prices posted the second-highest year-on-year increase, rising by 40.0% over the year, according to DOL data.
In response to the broad-based price increases, “The Federal Reserve’s more hawkish tone on inflation remains appropriate,” the Conference Board said.
“Presently, we anticipate quantitative easing (QE) tapering to conclude by March, followed by four 25 basis point rate hikes this year, and potentially some modest runoff of the balance sheet later in 2022.”
