Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating the Cost of Basic Household Supplies
Transcript
- Lucas: So you walk into a Target or a Walmart, you grab a pack of paper towels, a bottle of laundry detergent, a box of trash bags—stuff you literally cannot live without—and the total feels like it should be lower than it was two years ago. And for once, the data says your gut is right. Luna: Because our wages have been growing, but for a long time prices were growing faster. But you're saying this category—basic household supplies—is finally flipping? Lucas: Exactly. Let me give you the specific numbers. The Bureau of Labor Statistics released the May CPI data a few weeks ago—core CPI is at 336.1, up 3.4% year-over-year. That's the highest core reading since October 2023, so inflation is still sticky in a lot of areas. But if you drill into the 'household cleaning and paper products' subcategory, prices actually fell 1.2% over the past twelve months. Luna: Down 1.2 percent while average hourly earnings are up to 37.50. That's a pretty clear win for the worker's wallet. Lucas: It is. And this isn't a one-month fluke. That subcategory has been declining on a year-over-year basis for five consecutive months now. Meanwhile, average hourly earnings in May were 37.50, up from 37.41 in April. That's about a 4.3% annualized gain over the past year. So you've got prices falling and wages rising—real purchasing power gains that you can feel at the checkout. Luna: What's driving the price drop? Because I feel like I keep hearing about shrinkflation—smaller rolls, fewer sheets, concentrated detergent that's more expensive per ounce. Lucas: Shrinkflation is real, and it's still happening in some categories—chip bags, ice cream, that kind of thing. But for household supplies, the main story is commodity costs. A lot of the raw materials in paper products—pulp, wood fiber—have come down in price over the past year. Global pulp prices dropped about 15% from their peak in 2023. And for detergents and soaps, the cost of surfactants and palm oil derivatives has eased. Luna: So the input costs fell, and manufacturers passed some of that on. That's… refreshingly honest. Lucas: Right? Not always the case. But in this category, competition is fierce. You've got Procter & Gamble, Kimberly-Clark, Clorox, and then the store brands—Walmart's Great Value, Target's Up & Up—all fighting for shelf space. When commodity costs drop, private labels can undercut the big brands quickly, and then the big brands have to respond. Luna: And that's probably why you and I have both noticed the store brand paper towels are actually decent now. It's not just price—it's value perception. Lucas: Exactly. And here's a number that gives me confidence this is sustainable: the 10-year breakeven inflation rate is at 2.21%. That's the market's expectation for average inflation over the next decade. It's up a bit from 2.18% a couple of days ago, but it's still in the range the Fed wants. So if long-term inflation expectations stay anchored, and wage growth remains strong—which it has been—then this category should stay affordable. Luna: But I do want to push back a little. The core CPI at 3.4% is still above the Fed's 2% target. So not everything is getting cheaper. Services, rent, insurance—those are still going up. Household supplies are a bright spot, but they're not the whole picture. Lucas: No argument there. And that's why I think this is such an interesting episode to do. Because when you hear 'inflation is still hot,' it's easy to feel pessimistic. But if you're a typical worker earning $37.50 an hour, the things you buy every week—toilet paper, dish soap, garbage bags—are actually taking a smaller bite out of your paycheck than they were a year ago. That's a real, measurable improvement in living standards. Luna: If this episode has helped you make sense of your own household spending, or if you've ever nodded along when Lucas pulls up a BLS table, you might want to know how we keep the show ad-free and independent. Lucas: Yeah, it's pretty simple. Listener support. If today's conversation was useful to you, you can head over to buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. No pressure, no perks, just a way to keep these episodes coming without any sponsors. Luna: Alright, back to the numbers. Lucas, you mentioned pulp prices falling. But is there any risk that tariffs or supply chain disruptions could reverse that trend? Lucas: Great question. Because the Strait of Hormuz headlines are a reminder that global trade is fragile. A lot of the feedstocks for plastics and chemicals come through that region. If we see a sustained disruption, it could push up costs for detergent and trash bag manufacturers. But so far, the impact has been contained—the breakeven inflation rate barely budged. Luna: So the market is betting this is a temporary blip, not a new inflation shock. Lucas: Exactly. And the other thing to watch is the labor market. If wages keep growing at 4% or more, but productivity doesn't keep up, companies might eventually have to raise prices to protect margins. But right now, productivity in the nonfarm business sector grew at a 2.3% annual rate in Q1, so that's decent. Luna: I want to get concrete. For someone listening, what does this actually mean for their monthly budget? Like, how much are they saving on household supplies versus a year ago? Lucas: I ran a quick back of the envelope. The average household spends about $80 to $100 a month on household cleaning and paper products, according to the Consumer Expenditure Survey. If prices are down 1.2%, that's about a dollar a month in savings—not huge. But combine that with a 4.3% wage increase, and your real income in that category is up about 5.5%. On a $3,000 monthly paycheck, that's an extra $165 in purchasing power just from this one category. Luna: So the raise is finally beating the price of paper towels. That's a nice headline. Lucas: It is. And it's not just paper towels. The same dynamic is playing out in other goods categories—apparel, furniture, used cars. But household supplies feel especially personal because you buy them so often. Every time you restock, you get a small win. Luna: What about the future? Do you see this lasting, or is it a temporary reprieve? Lucas: I think it lasts at least through the rest of this year. Commodity prices are still low, competition is intense, and wage growth is likely to stay strong because the labor market is tight—unemployment is at 3.8% as of May. The risk is if the Fed has to raise rates again because core inflation doesn't come down, but that seems unlikely given the current data. The 10-year breakeven is telling us the market expects inflation to moderate. Luna: So the bottom line for listeners: your paycheck is finally winning against the stuff you buy every week. But keep an eye on services—that's where the pressure is. Lucas: Exactly. And I'd add this: if you can, lock in those lower prices by buying store brands. The quality gap has narrowed, and the price gap is still wide—often 20 to 30% less than national brands. That's free money in your pocket. Luna: And on that note, I think we've covered enough ground. Lucas, thanks for walking us through the data. Lucas: Always a pleasure, Luna. For everyone listening, keep an eye on your own shopping cart—the economy is made of small wins like this one.