U.S. workers face real wage squeeze as inflation outpaces pay

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U.S. wage squeeze and inflation

Highlights

Average hourly earnings for private-sector U.S. workers rise 3% year over year in September while consumer prices jump 3.7%, resulting in real wage declines of 0.7%.
Gasoline prices surge 34% and fuel oil 74% from a year earlier in September, driving overall inflation up to 3.7% and increasing transport costs across industries.
The S&P 500 posts a total return of 26.29% in 2023 and 14.16% year-to-date through October 15, outperforming inflation despite 62% of constituents trading below their 50-day averages.

Wage and inflation pressures intensify

As reported by Weiss Ratings, average hourly earnings for private-sector workers rise 3% from a year earlier in September, while consumer prices increase 3.7%, leaving real average hourly earnings down 0.7% year over year. On a monthly basis, real wages also fall 0.5% in September, extending a six-month run of year-over-year declines in inflation-adjusted pay.

The analysis says workers had spent three years gradually recovering some of the purchasing power lost during the inflation shock of 2021 and 2022, when wages later began to outpace prices. That trend shifts as higher tariff-related costs and the Iran war push energy prices higher, with gasoline up 34% from a year earlier in September and fuel oil up 74%. Overall inflation accelerates to 3.7% from 3.4% in August.

Rising energy prices are also lifting costs beyond household fuel bills. Higher diesel and jet fuel prices are raising trucking, air travel and shipping costs, with those increases then filtering through to food, manufactured goods and other goods that depend on transport.

Investment case centers on equity returns

The piece argues that cutting spending has limits as a long-term response to inflation and presents asset ownership, particularly equities, as a stronger route to preserving and building wealth. It points to the U.S. stock market as a vehicle for outpacing inflation, noting the S&P 500 delivers a total return of 26.29% in 2023, 25.02% in 2024 and 17.88% in 2025, and is up 14.16% through Oct. 15 this year.

Over longer periods, the index has delivered an average annual return of 11.15% over the previous 20 years, including reinvested dividends, and an annualized 15.66% over the past 10 years, according to the text. The analysis also says broad market exposure alone may not be enough in a more selective market, with 62% of S&P 500 stocks recently trading below their 50-day moving averages.

Weiss Ratings uses that backdrop to promote its Ratings Plus product, saying its stock rating system applies data-driven analysis across more than 65,500 stocks, ETFs and mutual funds. The firm says stocks with a Weiss "Buy" rating have delivered average returns of more than 303% over the past 22 years, though the article presents those figures as part of a marketing pitch rather than an independent performance review.

In our earlier article on the S&P 500’s price outlook, we highlighted how a pickup in consumer-price inflation helped end a long streak without a 1% daily drop and triggered a shift toward risk-off sentiment. We also noted accelerating institutional selling and weakening technical signals, with the index slipping below key short- and medium-term moving averages and downside risks concentrated around nearby support levels.

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