Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / The Hidden Cost of Staying Employed in October 2026
Transcript
- Lucas: If you look at the headlines this week, the labor market sounds like it’s in perfect health. Jobless claims are sitting near their lowest levels since the nineteen sixties, which suggests that people are holding onto their jobs with an iron grip. But there is a subtle, expensive side effect to that stability that most workers aren’t talking about. Luna: You mean the idea that if you can’t get fired, you can’t really negotiate? Lucas: Exactly. It’s the complacency trap. When the fear of layoffs vanishes, the urgency to demand higher wages evaporates too. We’re seeing a disconnect where the average hourly earnings for private sector workers are up to thirty seven dollars and eighty cents as of early September, yet your actual purchasing power is taking a hit because the Core Consumer Price Index just ticked up to three hundred thirty eight point nine. Luna: So the paycheck looks bigger on paper, but the things you actually buy—services, insurance, rent—are still climbing faster than your raise. Lucas: Right. And the reason this is happening is that low firing rates reduce labor turnover. In a healthy market, you leave a bad job or a stagnant one to find better pay elsewhere. But when companies aren’t letting people go, they aren’t creating the open seats that allow workers to jump ship for higher wages. You’re stuck in place, earning slightly more, while the economy around you gets more expensive. Luna: It’s basically a hostage situation where everyone is too comfortable to move. Lucas: That is a very accurate way to put it. Think about the Employment Cost Index, which measures the total cost of labor including benefits. It was at one hundred seventy nine point zero in April, and it has been creeping up. But if you compare that to the ten-year breakeven inflation rate, which just rose to two point three four percent last Tuesday, the gap is closing. The market is telling us that wage growth is barely keeping pace with the underlying cost of doing business. Luna: And since most people don’t change jobs every quarter, they miss out on the biggest salary jumps that come with lateral moves. Lucas: Precisely. The median usual weekly earnings are sitting at one thousand two hundred four dollars, which is up from last year, but that number is heavily skewed by people who move. The majority of workers are staying put, accepting modest annual increases that are instantly swallowed by sticky service-sector inflation. We saw this in the UK recently where inflation jumped to three point five percent, cementing rate hike expectations. Here in the US, we’re not seeing the same spike, but we are seeing the same stagnation in real value. Luna: So the 'stability' employers love is actually the thing hurting our wallets long term. Lucas: It is. And this brings me to something important about how we support this show. If walking through the economy with us has made something click about where your money is going, consider supporting us directly. We deliberately don't run ads on these episodes because we want to keep the focus strictly on the data, not on sponsor messages. If you want to help us keep that standard, the link is buy me a coffee dot com slash fexingo — that's F. E. X. I. N. G. O. Just a quick note of appreciation if you find value in what we do. Luna: Yeah, it really helps us dig deeper into these numbers without worrying about corporate sponsors influencing the angle. Lucas: Back to the data. Let’s look at the PCE price index, which is the Federal Reserve’s preferred gauge. It was at one hundred thirty one point six in August, up from one hundred thirty one point one three. That might sound small, but it’s persistent. When you combine that with the fact that car buyers are demanding lower prices and better tech, automakers are caught in a squeeze. They can’t pass costs to consumers easily, so they hold back on hiring or raise wages only marginally to preserve margins. Luna: So even if you work in manufacturing or auto, your leverage is down because the end consumer is pushing back on price hikes. Lucas: Correct. And this pressure is rippling through the housing market, which is flashing warning signs right as the Fed weighs more interest rate hikes. Housing is a huge part of your cost of living, whether you own or rent. With the S&P fifty hundred dropping point nine percent over the last five days, investors are nervous about inflation sticking around. That nervousness keeps borrowing costs high, which means housing costs stay elevated, which eats into your disposable income. Luna: It feels like every time you solve one expense problem, another one pops up because the whole system is interconnected. Lucas: It is. And the irony is that Trump’s approval rating on the economy has hit an all-time low according to a recent survey, partly because voters feel this exact pinch. They see the job numbers, but they don’t feel the benefit. The disconnect between macro stability and micro struggle is widening. Workers are realizing that a job is no longer enough; it has to be a job. Luna: But if no one is getting fired, how do you force that growth? Do you just wait for a recession to shake things up? Lucas: Not necessarily. But you have to become intentional about mobility. The old playbook of 'show up, do good work, get a three percent raise' is broken. Because labor turnover is so low, the few people who leave are commanding massive premiums. If you’re not moving, you’re essentially donating your potential wage increase to your employer’s bottom line. Luna: So the advice is basically: even if you’re happy, start interviewing? That feels counterintuitive when job security is so high. Lucas: It feels counterintuitive, but it’s the only way to reset your market value. You need to know what you’re worth in a seller’s market, even if you don’t sell. The NASDAQ is down point eight percent over the week, and technology firms are being particularly cautious. If you’re in tech, that caution means fewer bonus pools and slower base pay adjustments. You can’t afford to be passive. Luna: It’s scary to think that staying safe is actually the riskiest financial move you can make right now. Lucas: It is. And look at the retail side of things. The Russell两千七 hundred is up point seven percent, suggesting small caps are doing okay, but that doesn’t always trickle down to wages. Small businesses are often the ones driving innovation, but they are also the ones most sensitive to the Employment Cost Index. If their labor costs go up too fast, they freeze hiring. So the cycle continues. Luna: It’s a tightrope walk for employers and employees alike. No one wants to break the other side. Lucas: Exactly. And that’s why we need to talk about the 'hidden tax' of this environment. It’s not a literal tax, but it’s a loss of opportunity. Every month you stay in a role that isn’t adjusting for Core CPI, you are losing ground. The difference between your wage growth and the inflation rate is effectively a tax on your future wealth. Luna: So if wages are up four percent and inflation is three percent, you’re only winning by one percent, but you’ve spent energy trying to keep the job rather than growing it. Lucas: Spot on. And consider the global context. The UK inflation shock we mentioned earlier shows how quickly service prices can rise when labor is tight. If that trend spreads, US service sector wages will have to catch up, but currently, they aren’t. The JOLTS data usually shows this tension, but with claims so low, the data is lagging. By the time it catches up, the damage to your savings account might already be done. Luna: It makes me wonder if the Fed’s next moves will force a correction. If they hike rates to fight that stubborn core CPI, won’t that finally break the low-fire trend? Lucas: That is the big question. If the Fed hikes, borrowing costs go up, which slows down business expansion. Fewer expansions mean fewer new roles. Paradoxically, fighting inflation might temporarily hurt wage growth by reducing the demand for labor. But it would also lower prices, restoring your purchasing power. It’s a trade-off between immediate cash flow and long-term stability. Luna: So we’re waiting for the other shoe to drop, hoping it drops on prices instead of jobs. Lucas: Yes. And until then, the smartest play is individual agency. Review your compensation against the national median weekly earnings of twelve hundred and four dollars. Are you above or below that? If you’re below, and you have skills in demand, the market is signaling that you should be somewhere else, even if the news says the labor market is 'cool.' Luna: Because the headline numbers are averaging out the winners and the losers, and most of us are stuck in the middle. Lucas: Right. The averages lie. The reality is in the details of your specific industry and your specific contract. If you’re in a service-heavy role, watch those insurance premiums and healthcare costs closely, as they are rising faster than goods. Those are the silent drains on your net worth. Luna: It’s a lot to manage when you’re just trying to get through the week. Does this mean we should stop trusting the economic indicators entirely? Lucas: No, trust them, but interpret them differently. Low unemployment is good for society, but neutral for your wallet unless it drives turnover. High CPI is bad for your budget, but it signals that prices are sticky. Use those indicators to decide when to act, not to feel safe. The safest place in the current economy is often a portfolio that includes skills that can be sold, not just a salary that is earned. Luna: So the real asset isn’t the job anymore, it’s the optionality to leave it. Lucas: Exactly. Optionality is the new currency. And as we head into the final stretch of Q4, keep an eye on those October breakeven rates. If inflation expectations stay above two percent, that wage-price stalemate we discussed last week will continue. You’ll need to be proactive, not reactive. Luna: I guess the best defense is a good offense, even if the war isn’t technically happening. Lucas: Well said. For Lucas and Luna, I’m reminding you that the market rewards motion, not just endurance. Stay curious, stay mobile, and we’ll catch you next time.