Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of a Dog
Transcript
- Lucas: So Luna, I was looking at the latest CPI print from July, and something jumped out at me. Overall inflation is cooling — the index came in at 332.8, basically flat from the month before. But if you're a dog owner, your costs are probably still going up faster than your paycheck. Luna: Okay, I feel targeted. My vet bill just went up twenty percent year-over-year. What's going on? Lucas: That's exactly the puzzle. While the average hourly earnings hit $37.60 in July, and the employment cost index for wages climbed to 179, the cost of veterinary services has been outpacing both. And pet insurance premiums have been rising even faster. But here's the twist — for the first time in a while, your raise might actually be keeping up. Luna: Wait, so my raise is beating the cost of my dog? That's the headline? Lucas: For many workers, yes. Let's break it down. The employment cost index — that's the broadest measure of what employers pay in wages and benefits — has been running around four percent annually. And average hourly earnings are up about four and a half percent over the past year. Meanwhile, the CPI for pet food has been rising at about three percent. So your paycheck is growing faster than the kibble. Luna: So the food part is manageable. But what about the vet visits? That's where I feel the pinch. Lucas: That's the real story. Veterinary services inflation has been running at six to seven percent annually, according to the latest data. So if your wage growth is four to five percent, you're still losing ground on that specific line item. But here's the thing — when you bundle all dog-related costs together, the average pet owner spends about $1,500 a year. And with wage growth at 4.5 percent, the average worker's annual raise is roughly $2,000. So you're actually net ahead on the whole basket of dog expenses. Luna: So I'm not falling behind on my dog, but I might be on the vet. That's a weird split. Lucas: Exactly. And that's why we're doing this episode — to unpack why some costs are still running hot. Take pet insurance, for example. Premiums for pet insurance have been climbing double digits for years. The latest figures show a typical policy now costs around $40 a month, up from $30 just three years ago. That's a 33 percent increase. But here's the counterintuitive part: if you're insured, your out-of-pocket vet costs are actually lower, so the net effect on your budget might be neutral or even positive. Luna: Huh. So buying insurance is like a hedge against the high inflation in vet services? Lucas: Precisely. And that's the kind of trade-off that's worth thinking about. But let's zoom out. The broader picture is that wages are finally outpacing overall inflation. Core CPI, which strips out food and energy, is running at about 3.2 percent year-over-year. And with wage growth at 4.5 percent, that means real wages are up over a percent. That's a big deal after two years of negative real wage growth. Luna: So we're not just talking about dogs. This is a sign that workers are finally getting ahead. Lucas: Right. But there are pockets where that's not true. And veterinary care is one of them. So the question is: how long can that persist? Let's look at the PCE price index, which the Fed prefers. That's actually decelerating — it came in at 131.4 in June, down slightly from the month before. So the broader trend is disinflation. But services like vet care are sticky. Luna: Why are vet costs so sticky? Is it just because we love our pets too much to say no? Lucas: That's part of it. But there's a structural reason: the cost of veterinary education has skyrocketed, and clinics are passing those costs on. Also, there's a shortage of veterinarians. The AVMA, the American Veterinary Medical Association, says the number of vets per capita has barely budged in a decade, while pet ownership has surged. So supply and demand is the real driver. Luna: So it's not just that we're spending more on fancy treats. There's an actual supply constraint. Lucas: Exactly. And that's why the cost of care is likely to keep rising faster than headline inflation for a while. But the good news is that your income is growing faster than the overall cost of living. So even if the vet bill is up, your total purchasing power is improving. Luna: So if I'm a listener who's thinking about getting a dog, what's the takeaway? Lucas: The takeaway is that the average dog owner's costs are around $1,500 a year, and your raise is probably covering that and then some. But you should budget for the fact that vet costs specifically are rising at six percent or more. So have a cushion. And consider pet insurance if you're worried about a big bill. Luna: That's solid advice. But I have a question — is the wage data really capturing everyone? The median weekly earnings are around $1,204, which is solid. But what about the folks who are not getting those 4.5 percent raises? Lucas: That's a fair point. The average can be skewed by high earners. But even the median wage growth is tracking close to that. The employment cost index, which covers all workers, shows wages up about 4.1 percent. So the median worker is still ahead of the CPI at 3.2 percent. It's not universal, but it's broad-based. Luna: So we're not out of the woods, but we're in a better place than we were in 2022. Lucas: Absolutely. And that's worth celebrating. But let's get back to the dog for a second. There's another angle — the cost of dog food. We mentioned it's up about three percent. But there's been a lot of volatility in lettuce prices lately, and that got me thinking about how supply shocks can hit specific goods. Dog food is more stable because it's a processed product, but it's not immune to commodity swings. Luna: So the lesson is to brace for the vet, not the kibble. Lucas: Right. And that's a useful way to think about your budget. Now, before we wrap up — and I don't want this to sound like a pitch — but if you've been getting something out of these conversations, a couple of dollars a month genuinely makes a difference. It's what keeps these shows ad-free and independent. You can find us at buy me a coffee dot com slash fexingo. And honestly, even a small contribution helps us keep doing the research that goes into episodes like this. Luna: Yeah, Lucas is too modest to push it, but we really do rely on that support. And it's a way for you to get even more value out of the show. Lucas: So, back to the dog. The bottom line is that for the average worker, your raise is finally beating the cost of owning a dog — but you have to be smart about the vet side. And that's a microcosm of the broader economy: wages are outpacing inflation, but not every category is created equal. Luna: So if you're a dog person, you can breathe a little easier. But keep an eye on that vet bill. Lucas: Exactly. And that's the kind of insight we like to leave you with. It's not just about the headline numbers — it's about how they show up in your monthly budget. Thanks for being here, and we'll talk to you next time.