According to recent data from the Organisation for Economic Co-operation and Development (OECD), the US has experienced the highest real wage growth among G7 nations in the past four years. Real wages in the US were 5.8% higher in 2022 compared to 2019, outperforming other G7 countries such as Canada, Italy, Germany, Spain, and Greece, which all saw decreases in real wages during this period.
This positive trend in real wages comes as good news for Americans, as it means increased purchasing power and potentially less strain on their wallets. The US has also been leading the G7 countries in terms of GDP growth and one measure of inflation, compensating for differences in how each country calculates inflation.
In June, real average hourly earnings in the US rose by 0.2% month over month and increased by 1.2% from the previous year. This marked the first time in 26 months that real weekly earnings substantially grew on an annual basis. Additionally, real wages caught up with inflation in May for the first time in two years, further indicating positive growth.
These improvements in real wages could lead to increased consumer spending, which may contribute to keeping inflation levels above the Federal Reserve's target of 2%. However, the Fed is likely to raise interest rates to keep inflation in check, although strong consumer price index and labor market data may influence the timing of the rate hike.
Despite recent job growth slowing down, with the US adding 209,000 nonfarm payroll jobs in June compared to 306,000 in May, the upward trend in real wages has boosted Americans' confidence in the economy. As a result, the likelihood of a recession in 2023 is diminishing.
Overall, the US is outperforming other wealthy nations in terms of real wage growth, GDP growth, and inflation. This positive economic performance is providing Americans with more purchasing power and a renewed sense of optimism about the future.