Wage Growth Falls Behind Prices for First Time in 3 Years
Rising Gas Prices Add Pressure on Household Budgets
Economists Warn Consumer Spending Could Slow
American workers are once again falling behind inflation as wage growth trails rising consumer prices, worsening financial anxiety for many households and raising concerns about a broader economic slowdown.
According to a recent poll conducted by CBS News, nearly three out of four Americans say their income is no longer keeping pace with inflation. About 76% of respondents said they are concerned about their personal financial situation.
Economic data reflects that growing concern. In April, the Consumer Price Index (CPI) increased 3.8% from a year earlier, while average wage growth rose only 3.6%. It marked the first time since 2023 that inflation outpaced wage gains.
Economists say surging energy prices are one of the main drivers behind the renewed inflation pressure. According to Labor Department data, energy costs accounted for roughly 40% of April’s inflation increase. Gasoline prices alone jumped more than 28% compared to a year ago.
Higher fuel costs are affecting far more than just drivers at the pump. Analysts say rising transportation and shipping expenses are pushing up prices for groceries, consumer goods, and other everyday necessities.
Angela Hanks, chief of policy programs at The Century Foundation, told CBS News that consumers are increasingly feeling squeezed across nearly every category of spending.
“People are looking at higher prices across the board, and their dollar is not carrying them as far as it previously was,” Hanks said.
Ongoing tensions in the Middle East are also fueling market uncertainty. Concerns surrounding Iran and broader regional instability have increased volatility in oil markets, leading some economists to warn that energy prices could remain elevated for an extended period.
Jerome Powell, speaking shortly before leaving the Federal Reserve, said higher energy costs could continue pushing inflation upward in the near term.
“In the near term, higher energy prices will push up overall inflation,” Powell said, adding that the longer-term economic effects remain uncertain.
At the same time, economists say higher tariffs on imported goods are also contributing to rising consumer prices as businesses pass additional costs onto consumers.
Analysts are increasingly worried that sustained affordability pressures could eventually weaken consumer spending, which accounts for roughly two-thirds of U.S. economic activity. While spending has remained relatively resilient so far, experts warn that continued pressure on household budgets may force Americans to cut back.
Center on Budget and Policy Priorities chief economist Gbenga Ajilore warned that spending pullbacks may soon extend beyond lower-income households.
“At some point, a majority of consumers — not just low-income ones — are going to pull back their spending, and that is going to lead to lower economic growth,” Ajilore said.
The CBS survey also found that 64% of Americans describe the current economy as either “very bad” or “fairly bad.” Rising housing costs, insurance premiums, food prices, and fuel expenses were among the most common concerns cited by respondents.
Economists say that unless wage growth once again exceeds inflation, consumer confidence and overall economic momentum could continue weakening in the months ahead.
