U.S. workers saw real wages drop 0.6% last year

Washington, D.C. The U.S. Department of Labor reports that private-sector workers lost ground on spending power over the last year. Real wages and salaries for these employees fell 0.6% after adjusting for inflation.

The Employment Cost Index shows that total compensation for civilian workers rose 3.4% over the twelve months ending in September. This figure includes both wages and benefits. Wages and salaries specifically increased by 3.1% during that period. Benefit costs climbed faster, rising by 3.9%.

State and local government workers also saw a decline in real pay. Their inflation-adjusted wages slipped 0.5% over the past year. Price increases for goods and services have outpaced these pay gains. This trend lowers purchasing power even as employers spend more on compensation.

The report identifies a key challenge for the Federal Reserve. The central bank is trying to tame inflation without causing a sharp slowdown in hiring or wage growth. The Employment Cost Index is one of the primary tools the Fed uses to monitor wage and benefit pressures in the economy.

The Fed raised its benchmark interest rate for the first time since 2023 six weeks ago. That move was designed to control high inflation. The central bank stated that another rate hike could occur later this year. Consumer inflation accelerated in September, according to government data released last month.

The data indicates that pay raises are not keeping up with the rising cost of living. This gap creates frustration for many American households. The report provides a snapshot of the current balance between wage growth and price stability.