Consumer prices in the United States increased 3.4% in August from a year earlier, according to the Bureau of Labor Statistics. Over the same period, average hourly earnings rose 3.1%, a gap that pushed real average hourly earnings down 0.1% from July and 0.3% from a year earlier.
Heather Long, chief economist at Navy Federal Credit Union, said the divergence signals a loss of purchasing power for many workers. She noted that the trend reversed a period from May 2023 to April 2024 when wage growth had been gradually catching up with inflation.
Energy costs are a key driver of the latest inflation surge. Gasoline prices rose 3.9% in August, accounting for more than a third of the consumer price index’s gain, while diesel reached $6 per gallon amid supply disruptions linked to the wars in Iran and Ukraine. Navy Federal previously estimated a 21% jump in gasoline prices in March, pushing its internal car‑ownership cost metric to a record level.
Long expects the mismatch between wages and prices to persist, projecting that convergence may not occur until early 2027. In the meantime, households are tightening spending. Data from YouGov shows higher‑income shoppers gravitating toward warehouse clubs such as Costco, while middle‑ and lower‑income consumers favor Walmart. Navy Federal’s internal data on roughly 15 million members reflects a similar shift, with shoppers moving from premium grocery chains to discount retailers to stretch their dollars.
The sustained pressure on real wages and the broader consumer‑spending slowdown could weigh on overall economic activity, given that household consumption accounts for about two‑thirds of U.S. GDP.
