New government data showed working-class consumers in the United States seeing a bump in pay, The Wall Street Journal reported Thursday (July 23).
Economists said improved finances among working-class people at the lower tier of the economy could explain why they’ve upped their spending on essentials and discretionary items, per the report.
The data from the Labor Department showed an uptick in weekly earnings growth for low- and middle-income full-time workers in the second quarter, compared with a year ago, the report said.
Weekly pay climbed 5.5% for workers at the 25th percentile of earnings and 4.6% for workers at the median, the data showed, outpacing inflation, according to the report.
Not all data showed an improvement for these workers, and any relief could be temporary due to factors like rising fuel prices, new tariffs and artificial intelligence-related pressures. The workers who would benefit the most from higher paychecks are also the most sensitive to higher prices, the report said.
Atsi Sheth, an economist and chief credit officer at Moody’s Ratings, called the data a “nice bump” for low-income workers but cautioned that the weekly earnings growth could indicate people putting in longer hours instead of higher wages, according to the report.
But Guy Berger, an economist at the Burning Glass Institute, said workers getting the option to take on more hours suggests a healthy labor market, per the report.
Meanwhile, the PYMNTS Intelligence report “Why Job Security No Longer Shields Paycheck-to-Paycheck Consumers” found that while steady employment still gives consumers confidence, that in itself is no longer enough to maintain financial resilience.
“Consumers generally still feel good about their employment prospects, yet the households under the most strain are showing weaker resilience, lower emergency readiness and less room to absorb a financial shock,” PYMNTS reported July 2. “In other words, job security is starting to look like a strong engine in a car with very little fuel in the tank. It helps, but it does not guarantee the trip will go smoothly.”
