Market Overview

Average Earnings Are Falling, Prices Are Rising: Economic Numbers Indicate Hard Times For Consumers

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Average Earnings Are Falling, Prices Are Rising: Economic Numbers Indicate Hard Times For Consumers

Real average hourly earnings for all employees fell 1.7% from May to June, while real average weekly earnings decreased 2.3%, in part due to a 0.6% drop in hours worked in an average workweek.

These numbers come from the monthly Real Earnings Report released Tuesday by the Bureau of Labor and Statistics. 

What Happened: The decrease in real average hourly earnings decrease is a combination of a 1.2% decrease in average hourly earnings coupled with a 0.6% Consumer Price Index increase.

The 1.7% decrease is the second consecutive month of real hourly earnings experiencing a decrease and the largest decrease in the past year.

From June 2019 to June 2020, real average hourly earnings rose 4.8%, along with a 0.9%  increase in the average workweek during the same time period.

Why It’s Important: Unemployment is still firmly in double digits nationwide, and that fact coupled with a declining number of average hours in the workweek isn’t a good sign.

Part of this could be attributed to people taking time off for holidays, but it's most likely being more impacted by limited business activity.

Some companies such as Kroger (NYSE: KR) that were offering hazard pay to their workers have since stopped these "bonuses." Other large companies including Target (NYSE: TGT) are on hiring sprees and offering higher-than-usual starting wages.

The CPI increasing for common goods while wages are decreasing is not a good mix for the average worker's pocketbook. 

What’s Next: As many states are going into either a first or second round of coronavirus shutdowns, workweek hours are likely to decrease, which will most likely lead to a decrease in weekly earnings.

The July 2020 Real Earnings Report will be released Wednesday, Aug. 12.

 

Related Articles (KR + TGT)

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