Inflation-adjusted wages have fallen for six consecutive months, shifting the burden of consumer spending onto stock market gains and affluent households as fuel costs weigh on the average paycheck.
High fuel prices are a key driver of the inflation eroding real wages, indicating elevated oil prices.
Real hourly earnings have declined 0.7% since February as persistent inflation, driven by elevated fuel prices, outpaces wage growth. This erosion of purchasing power forces the economy to rely heavily on stock market wealth and affluent consumer spending to maintain growth, creating potential vulnerabilities if market momentum stalls.
Real wages are falling because the Consumer Price Index is rising faster than average hourly pay, largely fueled by higher energy and fuel costs.
With wage growth stagnant, consumer spending is currently bolstered by the 'wealth effect' from the AI-driven stock market boom, particularly among affluent households.