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 Beach Vacation
Transcript
- Lucas: So here's a question that's been on my mind: when was the last time your raise actually made a beach vacation feel more affordable — not just in your head, but in real dollars? Luna: Probably never, in the last few years. Every time I look at hotel rates or airfare, it's like, 'nope, not this year.' Lucas: Right. But the data out this month is starting to tell a different story. Average hourly earnings for private workers hit $37.60 in June, up from $37.51 the month before. And the Consumer Price Index actually fell slightly — 3.5 percent annual inflation in June, down from 3.6 percent in May. Luna: And core CPI, excluding food and energy, also dipped — 336.1 in June. That's basically flat. Lucas: Exactly. So let's make this concrete. I pulled together some pricing on a typical week-long beach vacation — say, driving from Charlotte to the Outer Banks. That's about a five-hour drive. Last summer, a week rental of a modest three-bedroom house in Nags Head ran around $2,200. This year, it's more like $2,350 — so up about 6.8 percent. Luna: Ouch. That's still outpacing wage growth. Lucas: But here's where it gets interesting. The big expense that's actually falling is transportation. Gas prices have dropped significantly — wholesale prices were down 0.3 percent in June, and the headline CPI drop was partly due to lower energy costs. The national average for regular gas was about $3.40 a gallon last July; today it's around $3.10. That saves you maybe 30 to 40 bucks on a round trip. Luna: And if you're flying to a beach destination? Airfares are down too. Lucas: Yes — airfare is down about 4 percent year-over-year, according to the latest CPI release. A round-trip ticket from Charlotte to Miami this July is about $280, versus $320 last summer. So that's another $40 saved. Combine those, and you've already offset the increase in lodging. Luna: So the net effect might be that a beach vacation costs roughly the same as last year, while your paycheck is slightly bigger. That's a real shift. Lucas: Right. Your raise is finally beating the cost of that vacation — or at least catching up. The U.S. Travel Association did a survey and found that average vacation spending per person this summer is down about 2 percent from last year. People are still going, but they're being more careful. And for the first time in a while, wage growth is actually outpacing the overall cost of that trip. Luna: I want to dig into that. You mentioned wages are up — average hourly earnings at $37.60. But that's an average. Who's actually seeing the gains? Lucas: Good question. The employment cost index for wages hit 177.5 in the first quarter of 2026, up from 176.23 at the end of last year. That's a 0.7 percent increase in just three months — annualizing to about 2.8 percent. For the lowest quartile of earners, wage growth has been even stronger — closer to 4 percent — because of tight labor markets and minimum wage increases in several states. Luna: So the people who most feel the pinch of vacation costs are the ones who are seeing the biggest raises. That's encouraging. Lucas: It is. But let's not get too rosy. The cost of dining out at beach restaurants is still up — menu prices rose about 3.5 percent over the past year. And if you're renting a car, those rates are up nearly 8 percent because of fleet shortages. So the savings at the pump and on airfare can get eaten up pretty quickly. Luna: Right. So the real story is that the components of a vacation are diverging. Some things are getting cheaper — gas, airfare — while others, like lodging and car rentals, are still rising. The net effect is a wash for many people. Lucas: Exactly. And that's actually a change. For the past three years, every component was going up. Now we're seeing enough disinflation in key categories that the overall picture is more manageable. The ten-year breakeven inflation rate is at 2.23 percent — down from 2.25 a week ago. Markets are betting that inflation will stay moderate. Luna: So for the average worker, a beach vacation this summer might feel like less of a financial stretch than it did a year ago. That's a tangible win for purchasing power. Lucas: And it ties into something bigger. If we think about the economy in terms of what people actually experience — not just GDP numbers — the fact that your raise is finally covering a real discretionary purchase like a vacation matters. It's a signal that the post-pandemic inflation squeeze is loosening. Luna: Yeah, but I want to push back a little. What about international travel? If someone wants to go to Cancún or Europe, the dollar has been strong, but airfare and hotel costs there have also risen. Is the same story holding? Lucas: It's a mixed bag. The strong dollar helps — it's up about 5 percent against a basket of currencies over the past year. But international airfares haven't dropped as much as domestic ones. And some destinations, like those in the Caribbean, have seen hotel rates spike because of demand. So the 'raise beats vacation' story is more domestic than global. Luna: That makes sense. So for the U.S. worker staying stateside, things are looking up. But if you're eyeing that week in Tulum, you might still be waiting. Lucas: And that brings me to something I want to mention quickly. We're able to dig into this data because of a small group of listeners who support the show through buy me a coffee dot com slash fexingo. It's a simple way to keep the podcast ad-free and focused on the numbers that matter — not sponsored content. If you find these conversations useful, it's one way to help keep them going. Luna: Yeah, it really does make a difference. We hear from listeners who say they've started using CPI data in their own budgeting, and that's exactly the kind of thing we want to enable. Lucas: So back to vacations. One more data point: the PCE price index, which is the Fed's preferred measure, came in at 131.5 in May, up from 130.94. That's a 0.4 percent monthly increase — still elevated but moderating. Core PCE was 130.1, also up modestly. So the trend is in the right direction. Luna: And all of this feeds into the outlook for the second half of 2026. If wages keep growing at 3 to 4 percent and inflation stays around 2 to 3 percent, then real purchasing power is finally positive. Lucas: Right. The worry was that we'd get stuck in a world where prices kept rising faster than paychecks. That's not what's happening. For the beach vacation example, the wage gain of about 2.8 percent over the past year just about matches the overall cost increase of the trip — and in some categories, you're actually coming out ahead. Luna: What about the regional variation? The Outer Banks is one thing, but what about a trip to the Jersey Shore or a Gulf Coast beach? Lucas: Good point. The Jersey Shore saw bigger hotel price increases — about 9 percent year-over-year — because of strong demand and limited supply. Meanwhile, Gulf Coast destinations like Destin, Florida, have seen more moderate increases, around 4 percent. So it really depends on where you go. Luna: So the advice might be: if you can be flexible about your destination, you can find a place where your raise goes further. Lucas: Exactly. And that's the kind of practical takeaway we like to leave listeners with. The macro data is making its way into your wallet — it's just uneven. Luna: I think we can all toast to a summer where at least one part of the budget feels a little less painful. Lucas: Agreed. Here's to wage growth finally winning a round.