Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating Recreation Costs
Transcript
- Lucas: So Luna, we talk a lot about how wages are finally beating inflation in categories like rent, groceries, and healthcare. But there's one area that's quietly becoming a bright spot for workers' wallets — and it's not one we usually think of first. Luna: Let me guess — is it recreation? Because I've been noticing my streaming bills aren't going up as much, and I actually saw a deal on a new tablet recently. Lucas: Exactly. Recreation costs — that's things like televisions, streaming services, concert tickets, sporting events, gym memberships — are rising at their slowest pace in years. The latest CPI data from May shows recreation prices up only 1.8 percent year-over-year. Luna: Meanwhile, average hourly earnings for private workers hit $37.50 in May, up 3.2 percent from a year ago. So wages are growing almost twice as fast as recreation costs. Lucas: Right. And that's a meaningful shift. For years, recreation costs were rising faster than overall inflation — think about how much concert tickets and cable bills went up between 2020 and 2024. But now, the dynamic has flipped. Luna: What's driving it? I mean, we know consumer electronics tend to get cheaper over time, but live events? That's been a huge inflation driver. Lucas: There are a few forces at play. First, consumer electronics are still in a deflationary trend — the price index for TVs and computers fell about 6 percent in the past year. Streaming services have also hit a price ceiling after multiple rounds of increases, and now platforms are competing more aggressively on bundles and ad-supported tiers. Luna: And live events? I've seen some venues actually dropping ticket prices for certain shows to fill seats. Lucas: Exactly. The post-pandemic surge in demand for live experiences has started to normalize. Supply has caught up — more tours, more festivals, more shows — and that's putting downward pressure on prices. Even gym memberships, which spiked during the inflation surge, have stabilized. Luna: So for the average worker, this means their raise is going a little further when it comes to leisure and entertainment. That's not nothing. Lucas: It's actually a big deal psychologically. When people feel like they can afford to go out, buy a new gadget, or subscribe to a service without guilt, it boosts consumer sentiment. And we've seen consumer confidence tick up in recent months, even with energy prices still high. Luna: But energy prices are the elephant in the room. Wholesale prices surged 1.1 percent in May, driven largely by energy. And the ECB just hiked rates because of the Iran conflict. If energy keeps going up, it could eat into that recreation benefit. Lucas: That's the risk. The 10-year breakeven inflation rate is at 2.31 percent, up slightly, suggesting markets expect inflation to stay above the Fed's target. And core CPI is still running at 3.1 percent year-over-year. So recreation is a bright spot, but it's not the whole picture. Luna: Still, for the worker who's been feeling squeezed, having one category where their wage growth clearly outpaces price growth is a real win. It's not just theoretical. Lucas: And it's worth noting that this isn't just about cheap gadgets. Recreation spending makes up about 5.5 percent of the average household budget. That's not huge, but it's discretionary — so when that category gets cheaper relative to wages, people actually have more freedom to enjoy life. Luna: Yeah, and speaking of enjoying life — if walking through the economy with us has made something click, or just helped you make sense of your own paycheck, we should mention that we keep this show ad-free on purpose. Lucas: Totally. We're not here to sell you anything or interrupt the conversation with sponsored segments. If that approach resonates, and you want to support it, the simplest way is at buy me a coffee dot com slash fexingo. No pressure, just an option for anyone who finds value in what we do. Luna: It's how we keep the analysis independent and focused on what actually matters for your wallet. So, back to recreation — do you think this trend can last? Lucas: I think it depends on a few things. If energy prices keep climbing, that could spill over into transportation costs for live events and shipping for electronics. But the structural forces — Moore's Law in chips, streaming competition, and venue supply — are pretty durable. I'd expect recreation to remain a relative bargain for at least the next year. Luna: And for workers, that means the raise they got this year might actually let them do something fun this summer. That's not a bad headline. Lucas: Not bad at all. And it's one of those rare moments where the data matches the feeling — at least in one corner of the economy.