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Wage dilemma
- Slowing wage growth
- Stubborn inflation pressure
- Jobs report on Friday
Narrator: So there's a bit of a wage dilemma in the U.S. So there's this strange disconnect in the U.S. labor market where we've continued to see wage growth slow this year,
Animation: chart shows wage growth declining from 2022. As of Sept. 30, 2026, wage growth was down 3% year over year.
Narrator: which from an economist's perspective tends to be a good thing because that means that there's not a whole lot of inflation being generated from the U.S. labor market. It prevents what's known as a wage price spiral, which is something that we saw in 2021 to 2022. Employment costs were soaring, and that was leading to upward pressure on inflation.
Animation: chart shows comparison between the Consumer Price Index and the Employment Cost Index. As of June 2026, CPI overtook ECI.
Narrator: The other side of this is that, of course, the worker is under pressure from inflation.
Animation: Chart shows monthly change in real disposable income. September 2026 saw negative wage growth for the first time since April 2026.
Narrator: And as we saw in September, real disposable personal income growth came in negative. So that leads to this sort of strange dynamic that we'll probably see in the jobs report this Friday, where if the economy continues to add jobs and we still have nominal wage growth, that's positive. That means that the consumer spending engine keeps going month to month.
So it does underscore that multiple things can be true, especially in this economy where you can see a fully employed labor market. You could see GDP growth that is still quite strong. But at the same time, real income growth can be negative. Unless you start to see outright job loss, then all of those probably continue to hold.