USA Wages and Inflation

USA Facts asks the question, “Are wages keeping up with inflation?” It answers the quest and then provides the data to support its contention. Saying “Yes. From January 2025 to January 2026, wages grew 1.9 percentage points faster than inflation.”

When you are listening to the news or reading an article in one of the local papers, you are not left with such a contention. Even so, if Angry Bear visitors are reading New Deal democrat’s daily reports on the economy; you know we are the cusp of a recession.

Wages are keeping up with inflation. Are costs out stripping wages. I get the impression people are struggling,

“Are wages keeping up with inflation?”

Nominal wages — the literal dollars earned regardless of cost of living — increased by 4.3% while inflation stood at 2.4%. When wage growth outpaces inflation, it indicates that workers are experiencing an increase in purchasing power from the previous year.

The Bureau of Labor Statistics has published average weekly wage data for nearly 20 years, since March 2006. Looking back, average wages outpaced inflation 72.6% of the time. Most recently, wage growth was faster than inflation in every month since June 2023.

A number of factors influence the nominal wage growth and inflation rates, including labor costs and the labor market itself. In May 2020, wages increased 7.6% over the previous year while inflation was at 0.2%, a record-high gap of 7.4 percentage points. This spike was attributed to pandemic labor market disruptions that disproportionately affected lower-wage jobs.

The biggest negative gap (4.3 percentage points) was in June 2022, when nominal wages grew by 4.8% year over year while inflation hit 9.1%.

We can measure the effect of inflation on wage growth by comparing the nominal average weekly wage to its inflation-adjusted (or “real” wage) equivalent. Since March 2006, the nominal average wage rose from $685 to $1,275, an 86% increase. Once adjusted to January 2026 dollars, it went from $1,116 to $1,275, a 14.3% increase. The nominal wage growth was $590, but the real wage growth was $159.

Between January 2025 and January 2026, the nominal average wage grew from $1,224 to $1,275 — $51 more a week, a growth rate of 4.3%. Accounting for inflation, the real wage growth was 1.1% or an additional $13 a week.

Real wage growth varies geographically. Over 12 months ending with December 2025, wage growth outpaced inflation in 45 states and Washington, DC, and the highest real wage growth was in Idaho, at 6.1%. In 5 states, real wage growth was negative, meaning wages didn’t keep up with inflation; New Hampshire saw the lowest growth, with 2.2%.

The Bureau of Labor Statistics releases monthly statistics tracking the wages of all non-government employees. In January 2026, the average weekly wage was $1,275. That represents the average wages of 135.3 million workers in different industries (excluding the government) and parts of the country.

Since the Great Recession, which ended in July 2009, the average weekly wage has generally increased, with a spike in 2020 at the start of the pandemic when a large number of low-wage workers lost their jobs. Higher-wage workers were less likely to be laid off in that period, causing the average weekly wage to jump.

“Are wages keeping up with inflation?” USA Facts