Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of Imported Goods
Transcript
- Lucas: So the latest data shows average hourly earnings for private workers hit thirty-seven dollars and sixty cents in June, up nine cents from the month before. Luna: Which is a pretty solid number, but the story we've been following for a while is whether that raise actually gets you more than it used to. Lucas: Right. And for a long time, the answer was no — inflation was eating it. But now the CPI has actually dipped, down to 332.6 in June from 333.98. That's a small decline, but it's a decline. Luna: So your nominal raise is going further. But here's what caught my eye this week: import prices posted a surprise gain, and the cost of goods from China hit its highest level since 2008. Lucas: Yeah, that's the wrinkle. For years, cheap imports from China were the thing keeping a lid on consumer prices — especially for electronics, clothing, toys. But that era may be ending. Luna: Which means the stuff you buy at Walmart or Target could start costing more, even if your wage is growing. So is your raise still winning? Lucas: So far, yes. And here's why: the categories where import prices are rising most — like furniture, appliances — are also categories where U.S. wages have been growing faster than the headline number. The employment cost index for wages hit 177.5 in the first quarter of this year, up from 176.23. Luna: So wage growth is outpacing the import-driven price increases, at least for now. But what about stuff like electronics? Those are still heavily imported. Lucas: Good question. Electronics prices have actually been falling for months — the core CPI excluding food and energy is basically flat, at 336.1. So your raise goes even further for a new laptop or phone. Luna: Interesting. So the narrative that 'everything is getting more expensive' doesn't really hold when you look at what people actually buy. Lucas: Exactly. The 10-year breakeven inflation rate is sitting at 2.24 percent — up a bit, but still well below the peaks we saw in 2022. Markets expect inflation to stay moderate. Luna: And that's key for the worker's purchasing power. If your raise is 4 percent and inflation is 2 percent, you're ahead. But if import costs start pushing inflation back up... Lucas: That's the risk. The China import data is a warning signal. But for right now, the data says your raise is beating the cost of imported goods. Luna: Let's talk about a specific example. Take a basic item like a pair of sneakers. Historically, those were almost all made in China. But with tariffs and rising Chinese labor costs, some production has shifted to Vietnam or Bangladesh. Lucas: Right. And that diversification actually helps keep prices stable. The PCE price index, which is the Fed's preferred measure, is only up to 131.5 from 130.94 a year ago — that's about 0.4 percent annualized. Very low. Luna: So the broader picture is that wages are finally gaining ground, even as we see these pockets of import price pressure. But I wonder how long that can last. Lucas: Well, the Fed is watching this closely. The FOMC has been holding rates steady, but if import prices keep climbing, they might have to rethink. But for the average worker right now, the math works in their favor. Luna: And that's worth appreciating, because it hasn't always been the case. For the past few years, every time you got a raise, it felt like it disappeared into higher grocery bills or rent. Lucas: Yeah, we've done a bunch of episodes on that — your raise vs. rent, vs. insurance, vs. flights. But this is the first time in a while where the broad-based story is actually positive. Luna: So what's the one thing you'd tell a listener to take away? Should they feel good about their purchasing power? Lucas: I'd say feel cautiously optimistic. If you're working and getting regular raises, you are probably keeping ahead of the cost of living right now. Just keep an eye on what's happening with trade policy and global supply chains — because that's the wild card. Luna: And speaking of keeping things going, we love being able to bring you this kind of analysis without ads or paywalls. If walking through the economy with us has made something click — maybe helped you negotiate a raise or just understand your own finances a bit better — you can support the show at buy me a coffee dot com slash fexingo. Lucas: That's right. It's a small way to help us keep doing what we do, and we really appreciate everyone who's chipped in. It makes a difference. Luna: Okay, back to the data. So we've got import prices up, but wages up more. Let's zoom in on one category where that really shows: furniture. Lucas: Furniture is a great example. Import prices for furniture have been rising because of tariffs on Chinese wood products. But at the same time, wages in furniture manufacturing and retail have been climbing — the median weekly earnings for all workers hit twelve hundred and four dollars in early 2025, up from eleven fifty-nine. Luna: So even if that sofa costs a bit more, your bigger paycheck covers it. Lucas: Exactly. And the same logic applies to appliances, tools, even some clothing. The categories where prices are rising are the same ones where wages are growing fastest. Luna: That's a pretty important nuance. It's not just that wages are going up — it's that they're going up in the sectors that are most exposed to import inflation. Lucas: Right. The employment cost index tells us that compensation is rising across the board, but especially in goods-producing industries. So the worker making that imported chair is also getting a raise. Luna: That's a virtuous cycle — but it's fragile. If import costs spike suddenly, wages might not keep up. Lucas: Absolutely. And that's why we keep coming back to this data. The breakeven inflation rate we mentioned — it's a market-based measure of expected inflation. At 2.24 percent, it suggests investors think inflation will stay contained. But one geopolitical shock — like the Hormuz situation we've seen in headlines — could change that fast. Luna: Right, the ECB is already having to rethink rates because of that. So far, the U.S. has been insulated, but oil prices are a big input. Lucas: Yeah. But for today, the story is clear: your raise is finally beating the cost of imported goods. And that's a headline worth celebrating — cautiously. Luna: Cautiously optimistic. I like that. Thanks, Lucas. Lucas: Thanks, Luna. We'll be back tomorrow with another angle.