Wage Growth May Not Rescue Paycheck-to-Paycheck Economy

Wages are increasing. 

The unemployment rate’s lower. 

The U.S. economy added more jobs in March than had been expected.

And yet, it all may not be enough to offset the pressures confronting consumers living paycheck to paycheck. 

As reported Friday (April 5), and per data from the Bureau of Labor Statistics, employers added 303,000 non-farm payroll jobs in March, where expectations had been for 214,000 additions. In tandem with those numbers, the unemployment rate slipped to 3.8% from 3.9% in February.

Wages were up 0.3% month on month, and gained 4.1% through the past year, the slowest pace seen in nearly three years. There’s a double-edged sword here. Tempered wage growth means that companies may not feel as pressured to boost prices to offset those heightened input costs and, at the least, maintain margins. Conversely, a slowdown in wage growth eats into purchasing power. 

In terms of wages, as pitted against inflation, there’s a bit of mismatch in the data, so things don’t line up exactly, but there’s evidence that wage growth is not covering the higher prices tied to at least some everyday essentials.

The 4.1% year-on-year increase in wages trails the 5.7% trailing inflation seen for shelter, per February data. Wage growth also trails the 4.5% boost in prices for dining out (arguably not an essential, but consumers do like their experiences), but covers the overall inflation rate of 3.2%.  

But separate data released at the very end of last month also show that consumer spending in February, as measured month on month, was up 0.8%. Personal income was up 0.3% over the same timeframe, and personal saving rate in the February data stood at 3.6%, down from 4.1%.

Paycheck-to-Paycheck Consumers Feel the Pinch 

Around 60% of U.S. consumers, PYMNTS Intelligence has found, live paycheck to paycheck. And 80% of those consumers have said that price increases are among their biggest everyday financial stressors. Sixty percent of consumers said they check the price tag before pulling the trigger and buying anything.

Separate PYMNTS Intelligence data found that 85% of consumers said their wages have not kept pace with inflation. More than a third of consumers report that the current inflation rate heavily impacts daily life.

PYMNTS Intelligence also found the share of consumers who think they can secure a new job that meets their salary needs is down from 50% in 2023 to 43% now. It remains to be seen whether the jobs data released Friday will do much — if anything — to alter these sentiments.