It is getting harder and harder for American workers to make ends meet as rising inflation outpaces pay gains, pushing down inflation-adjusted compensation at a pace almost never seen before.
Adjusted for inflation, hourly compensation fell 2.7 percent in the second quarter, data released by the Bureau of Labor Statistics on the nonfarm business sector showed Tuesday.
Real compensation fell 2.8 percent in the fourth quarter of 2011. That decline came in part because unadjusted wage gains were very small, just 0.5 percent. The economy was just extremely sluggish, with a low level of demand for labor following the financial crisis and the collapse of the housing bubble. The consumer price index increased 3.3 percent in the quarter.
The only other comparable contraction was in the first quarter of 1974, when real compensation fell 2.1 percent. That was in an atmosphere that was also very different from today’s, with extremely high inflation meaning prices outpaced wage gains. Consumer prices jumped 9.1 percent and wages rose 7.6 percent.
In the most recent quarter, unadjusted hourly compensation rose 2.0 percent compared with the 2020’s April through June period. CPI, however, was up 4.8 percent.
The losses to inflation are getting worse. Compared with the first quarter, real hourly compensation in the nonfarm business sector fell 4.8 percent.
Manufacturing compensation fell 3.3 percent compared with the start of the year and four percent compared with a year ago. That is the worst collapse ever. Compensation in durable goods manufacturing fell 2.8 percent on a quarterly basis and 4.3 percent from a year ago. Nondurable goods compensation was down 3.4 percent on both an annual and a quarterly basis.