US real wages 2026: purchasing power is recovering — but unevenly

The evidence suggests no — at least not yet. Real wages are recovering, but from a deeply negative position. Workers are catching up to lost purchasing power, not accelerating beyond productivity. The wage-price spiral requires wages to consistently lead prices upward. Instead, wages lagged prices significantly in 2021–23. The ECB, IMF, and Fed all acknowledge catch-up wage growth without seeing spiral dynamics.

Average Hourly Earnings (AHE) from the monthly jobs report is released the same Friday as non-farm payrolls — making it the most timely wage indicator. It is simple and widely cited. But AHE is subject to composition bias: if more low-wage workers are hired (which happened in 2020–21 reopening), average hourly earnings can fall even if every individual worker is getting a pay rise. The Employment Cost Index (ECI) controls for composition by tracking the same set of jobs over time. The Fed prefers ECI for policy analysis but watches AHE as the real-time signal.

Subtract the latest CPI rate from your nominal pay increase over the same period. If you received a 4.5% raise and CPI is 3.2%, your real wage grew roughly 1.3%. Use the inflation explorer to check the current CPI for your country, and compare against your nominal wage change. Note: if your spending basket is different from the average CPI basket (e.g., you rent rather than own, or spend more on food), your personal inflation rate may differ materially from headline CPI.