If you’ve gotten a raise over the last two years, almost all of those gains have now been eaten by inflation.
That is, if you’re the average wage-earner, considering the latest statistics released this week showing that prices were rising at a faster clip than expected.
It’s more evidence that affordability challenges in the US economy aren’t going away. It also means that average hourly pay, which had risen after Donald Trump took office in January 2025, is now right back to where it started, when taking inflation into account.
The average hourly wage was $35.84 in January 2025, according to federal statistics, or $37.79 in today’s dollars, adjusted for inflation. The average hourly wage last month was $37.81 — basically unchanged over the past 20 months.
Wednesday’s consumer price index inflation report from the Bureau of Labor Statistics came in hotter than expected, with prices up 3.7% over the year in September. Economists had expected a 3.6% increase, and the rate was well above August’s 3.4%.
“We read the September CPI report as another piece of evidence that the US is facing a persistent inflation problem,” economists at BNP Paribas said in a note to clients.
That problem means high prices — including gasoline that was up 9.1% in September compared to the previous month — are gobbling up pay increases you might get at work.
Heather Long, chief economist at Navy Federal Credit Union, underlined that consumer price growth since 2025 has eroded nearly all wage gains, citing the impact of the war in Iran, which began at the end of February, on Americans’ wallets.
“This is a very different picture from President Trump’s first term when wages were up over 15%, well above about 8% inflation,” Long said. “It helps explain the frustration many households feel right now with the economy.”
Higher prices are adding to a general sense of malaise about the economy. The University of Michigan’s consumer sentiment index dipped to 46.3 in October, down from 71.7 in January 2025.
Joanne Hsu, the director of the survey, said higher gas prices driven by the Middle East conflict have added to the ongoing cost-of-living pressures over the past several years.
Higher prices and inflation outpacing wage growth can be especially tough for Americans who are on tight budgets or living paycheck to paycheck. “When we look at the majority of the US workforce, people who are middle- and lower-income households, higher costs in things like gas and groceries take up a larger share of their income,” said ZipRecruiter economist Nicole Bachaud.
It’s important to note, there is more than one way to read the wage numbers as they relate to inflation — and in some ways, workers have actually come out ahead.
For example, average weekly earnings have grown faster over the last year than average hourly earnings, as the number of hours the typical worker works has edged up.
The Trump administration, when asked for comment, highlighted annual earnings. “Under President Trump, private sector workers have seen their wages continue to outpace inflation, with average annual earnings growing by more than $600,” said White House spokesperson Matthew Middleton.
Inflation will play a role in the midterms
The midterm elections are in just a few weeks, and affordability will likely be a key concern.
An Economic Innovation Group and Echelon Insights survey in September asked people what elected officials should prioritize most to make life better for workers. The survey said that 45% of American workers wanted officials to prioritize reducing the cost of everyday essentials, and 23% wanted them to focus on making housing more affordable.
Long, at Navy Federal, said the “modest increase” in grocery prices is a silver lining in the latest consumer price index report. Food at home, which includes groceries, rose at a slower pace than April’s 2.9%, with prices increasing 1.8% year over year in September.
“But it’s inevitable food prices will likely rise in the months ahead as higher diesel and transport costs are passed along to consumers,” Long said.
There are other ominous signs that inflation could worsen. Thursday’s producer price index report showed that final demand prices rose 1.3% in September, the highest since 2022.
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