The highly touted wage increases U.S. workers now enjoy are disappearing at a record rate as soaring inflation rips them away. The Employment Cost Index published Friday revealed total compensation for employees, which includes wages, health benefits and retirement, shrunk 3.7% for the year ending in March.
The Biden economy is a gift that just keeps on giving.
This marks the largest downturn since the Bureau of Labor Statistics began keeping records of this data in 2001. The numbers account for inflation to give a true picture of what workers earn and how much it costs employers to fill and retain positions.
The true picture? Employers are paying more in wages and benefits to attract and retain workers in the current tight labor market, but in real dollars paychecks are going down.
The Federal Reserve looks to this data as a key indicator of economic strength, and with its next meeting coming this week, the central bank is widely expected to take a more hawkish approach.
Interest rates dropped to near zero in the early days of the COVID-19 pandemic as the Fed attempted to keep the economy afloat with easy money policies. This, however, is one of a series of factors believed to have overheated markets and led to stubbornly high inflation.
A 50-basis point interest rate increase is now seen as likely in both its May and June meetings to try to curb inflation that has reached an over four-decade high. Energy and food prices continue to climb, and gas alone has leaped 48% in just the last 12 months.
President Biden, in a remarkable show of consistency and leadership this week, first responded to Thursday’s shocking news that the GDP shrank in the first quarter with “I’m not concerned about recession.”
Within minutes, however, the president acknowledged that there are predictions of a recession in 2023 and declared “I’m concerned about it.” Ok.
The White House can drag out every statistic in the world to show that their economic policies are working, but the American people are not fooled. Not when buying power is drastically shrinking and prices continue to climb through the roof.