One thing: Wages outpace inflation

One thing: Wages outpace inflation 

One thing you need to know about market movers and shakers, plus a handful of headlines. 


One thing that moved markets 

… is the noteworthy rise in America’s paycheck. 

In the first three months of 2024, 119.2 million U.S. full-time employees earned median weekly compensation of $1,136 – marking a 3.5% year-over-year jump.1 

Though this increase is slightly lower than the previous quarter’s record high of $1,442, it still exceeds the 3.2% increase in the Consumer Price Index over the same period. In other words: Wages outpaced inflation, signifying real gains in earnings for American employees at the start of this year. 

Wages underpin the bulk of spending throughout the economy, so more money for workers means the post-pandemic economic resilience in the U.S. could prevail in the near term. Retail sales numbers also rose 0.7% in March, much more than expected.

The relationship between wages and prices 

Wages and prices in the economy are inherently connected. Sometimes wages increase faster than prices, but that trend typically corrects itself over time. If wages outpace inflation, consumers usually spend more, bringing prices higher and back in line with wages. On the other hand, if inflation outpaces wages, consumers often spend less or seek raises to bring their earnings back in line with prices. 

That said, any wage gains or losses relative to prices still have a meaningful impact on the economy over the short to medium term, and can be important indicators of its current trend. 

Why wage growth matters 

The growth in real wages in the first quarter is a positive development. On balance, Americans were either able to save more money or spend more money in the first quarter. Increased savings naturally benefit U.S. households’ financial health, while increased spending on goods and services buoys America’s consumer-driven economy.

Still, an increase in real wages is a form of inflation, as Americans who have more disposable income tend to spend more, driving prices higher. This is a common occurrence in a strengthening economy, but it could complicate the Federal Reserve’s battle against inflation.

A strong labor market with increasing wages may be a good “problem” to have, but it’s important to understand some of the potential second-order consequences: Namely, higher-for-longer interest rates. If the economy is strong and American incomes are increasing, the central bank will be hard-pressed to ease monetary policy. 

And a few top headlines 

As of March, overall wage growth has cooled to 3.1% since its pandemic-era high of 9.3%, but there are still a number of industries seeing large pay increases.3 

  • The legal sector witnessed 5.7% wage growth, while those in dental and childcare saw 4.8% growth each. The overall labor market still remains strong, but these industries underscore the outsized strength in certain pockets of the economy.

The Inflation Reduction Act introduced a change that allows car dealers to offer an upfront discount on new electric vehicles, effectively turning the $7,500 tax credit into an immediate reduction upon purchase.4  

  • According to the Treasury Department, approximately 90% of eligible consumers are opting for this advance payment option, instantly providing them the full credit amount, regardless of their tax liability.

Roughly 36% of homebuyers and sellers are unaware that they can negotiate real estate agent fees.5 

  • 64% of buyers and sellers who requested a lower commission were successful, saving them thousands of dollars simply by asking for it.

What to be on the lookout for next week 

Next week will offer an update on March’s durable goods orders – a measure of items meant to last at least three years, such as refrigerators, computers, cars, or other products that aren't frequently purchased. Last month, durable goods orders rose by 1.4%, more than expected and starkly contrasting January’s steep 6.9% decline.6

Because durable goods tend to have higher ticket prices and are generally much easier to forgo than other products, orders can be a telling signifier of overall consumer health. If consumers are doing well, they are more likely to make these less frequent, more expensive purchases. Conversely, if consumers feel less economically secure, they may be more likely to skip big-ticket items. 

With the strength of the American consumer being a leading indicator for the economy, strong durable goods orders placed with manufacturers would be a positive sign for demand. In this scenario, businesses would be seeing a need for these higher-priced items and adding to their inventories based on the assumption demand is likely to continue.  

Get the scoop on your money.

Stay current on planning, saving, and investing for life.

  1. BLS, “Usual Weekly Earnings Summary,” April 2024. 

  1. Census Bureau, “Advance Monthly Sales for Retail and Food Services,” April 2024. 

  1. CNBC, “U.S. wage growth is cooling, but some jobs are still seeing relatively big annual raises,” April 2024. 

  1. CNBC, “90% of qualifying electric-vehicle buyers opt for $7,500 ‘new clean vehicle’ tax credit as upfront payment, Treasury says,” April 2024 

  1. LendingTree, “64% of Homebuyers or Sellers Who Asked Their Real Estate Agent for a Lower Commission Rate Were Successful,” February 2024. 

  1. Bloomberg, “US Durable Goods Orders Rise for First Time in Three Months,” March 2024. 

The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. No part of this blog, nor the links contained therein is a solicitation or offer to sell securities. Compensation for freelance contributions not to exceed $1,250. Third-party data is obtained from sources believed to be reliable; however, Empower cannot guarantee the accuracy, timeliness, completeness or fitness of this data for any particular purpose. Third-party links are provided solely as a convenience and do not imply an affiliation, endorsement or approval by Empower of the contents on such third-party websites. 

Certain sections of this blog may contain forward-looking statements that are based on our reasonable expectations, estimates, projections and assumptions. Past performance is not a guarantee of future return, nor is it indicative of future performance. Investing involves risk. The value of your investment will fluctuate and you may lose money. 

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements. 

Advisory services are provided for a fee by Empower Advisory Group, LLC (“EAG”). EAG is a registered investment adviser with the Securities and Exchange Commission (“SEC”) and subsidiary of Empower Annuity Insurance Company of America. Registration does not imply a certain level of skill or training.