Real wages fall as record price hikes hit US workers

There is no doubt were in a period of stagflation, Peter Kretzmer, a senior economist at Bank of America, told Bloomberg News, referring to the combination of stagnant growth and inflation, which characterized the US economy in the 1970s.

The consumer price statistics released last Thursday mirrored the producer price statistics. Seasonally-adjusted consumer prices jumped .8 percent last monthmore than double earlier predictionsand were up 5.6 percent since July 2007. Even so, inflation has picked up in recent months. While the Consumer Price Index rose at a comparatively low annualized rate of only 2.8 percent in the first quarter, it shot up at an annualized rate of ten percent in the past three months.

The living standards of workers continue to decline as the purchasing power of their wages falls and pay increases fail to keep up with inflation. The most recent Bureau of Labor statistics report found that real average weekly earnings fell by .8 percent from June to July. Over the past year, weekly earnings fell by 3.1 percent. Thus, the average household now earns a staggering $1,500 less than it would if wages had kept pace with inflation over the past twelve months.