Pay Raises Are Finally Beating Inflation After Two Years of Falling Behind

livemint.com:

Americans’ growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers, while complicating the Federal Reserve’s efforts to tame price increases. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases.

If the trend persists, it gives Americans leeway to propel the economy through increased spending, which could help the U.S. skirt a recession. Since estimates earlier this year, economists surveyed by The Wall Street Journal have lowered the probability a recession will start in the next 12 months.

Amy Silverman, a 61-year-old Brooklyn resident, said she has seen prices stabilize over the past few months after previously noticing an increase in food prices, especially when dining out. Silverman also secured a new job as a psychotherapist last year that pays more than her previous job, leaving her feeling confident about her economic future. “I don’t see inflation right now as being the problem it was many months ago," she said.

“I really feel like the ups and downs financially, it sort of evens out." Lower gasoline prices brighten consumers’ moods Not adjusting for inflation, private-sector workers’ hourly wages were up more than 4% in June from a year earlier. Those gains have eased over the past year, but remain enough to outpace inflation this summer. Overall consumer prices in June rose 3% from a year earlier, down sharply froma four-decade high a year prior.