For now real wages are still in line with the prepandemic trend. That might not last as inflation climbs even faster in the coming months
In February, consumer price gains in the U.S. hit a new 40-year high, with annual inflation reaching 7.9 per cent, figures released Thursday by the Bureau of Labor Statistics show. And that was before Russia’s invasion of Ukraine sent oil and other commodity prices into the stratosphere.
U.S. workers are feeling the bite. Wages in February rose just 5.1 per cent, which means they fell in real, or inflation-adjusted, terms. But it’s not quite that simple. As the chart below shows, real wages in both Canada and the U.S. surged during the pandemic but now appear in decline. It wasn’t that everyone suddenly got a massive pay hike over the past two years, though. The inflation rate cratered, giving people more spending power. But the lockdowns also wiped out so many low-paying jobs that average wages went up dramatically. As those lower-wage jobs have come back, the average has corrected.
For now real wages in Canada and the U.S. are roughly back in line with the prepandemic trend. Making this an important moment: If inflation climbs faster as spiralling commodity prices filter into supply chains, wages will have to surge to stay on trend. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening.
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