Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Your Raise vs Rent The Good News Nobody Is Talking About
Transcript
- Lucas: So we talk a lot on this show about how raises get eaten — by health insurance, by energy, by a dozen other things. But there's one big cost that's been the silent budget-killer for years, and the latest data suggests something is finally shifting. Luna: Rent. Lucas: Rent, specifically shelter costs overall. And for the first time in a while, your paycheck is actually gaining ground on it. Let me put the numbers on the table. Luna: Please, because I feel like every time I look at my rent check I wince a little harder. Lucas: Right. So average hourly earnings for private workers — that's April 2026, the most recent print — came in at $37.40, up from $37.35 the month before. That's about a 3.2 percent annualized growth rate over the last few months. Meanwhile, the shelter component of CPI, which is about a third of the whole index, is running at about 4.9 percent year-over-year as of April. Luna: So rent is still climbing faster than wages, right? That doesn't sound like good news. Lucas: It is if you stop at a headline. But look at the trend. Shelter inflation peaked at over 8 percent in early 2023. It's been decelerating steadily. And wage growth — which was actually negative in real terms back then — has been accelerating. The crossover happened sometime late last year. Since then, the gap has been widening in favor of workers. Luna: So you're saying my raise is now outpacing my rent increase, even if rent is still going up. Lucas: Exactly. And that's a huge reversal from the past three years. Let me give you a concrete example. Take the median weekly earnings number from early 2025 — that was $1,159. The latest, from early 2026, is $1,204. That's about a 3.9 percent increase. If your rent went up — say, the national average of about 4.9 percent — you're still losing ground. But if your rent increase was closer to the national median of 3.5 percent, you're actually ahead. Luna: So the story here is not that rent is cheap. It's that wages are finally catching up. Lucas: Right. And the labor market data supports that. Job openings surged to 7.6 million in April, the highest in nearly two years. Employers are competing for workers, and that's putting upward pressure on wages. So the structural backdrop is improving. Luna: But there's always a but, right? What about people who live in cities where rent is way above the national average? Lucas: That's the crucial caveat. The national average hides a lot. In places like New York, San Francisco, Miami, shelter inflation is still running 6, 7 percent. So for someone in those markets, the wage-rent gap might still be negative. But nationally, the trend is in the right direction. Luna: And what about homeowners? They don't pay rent, but they do pay property taxes and insurance, which are also in the shelter index. Lucas: Great point. The shelter index includes owners' equivalent rent — what homeowners would pay if they rented their own home. That's been sticky, partly because insurance costs have spiked in disaster-prone areas. But even there, the rate of increase is slowing. So the overall picture is: wages are winning the race against shelter for the first time in years. Luna: That actually makes me feel a tiny bit better about my next lease renewal. But I'm still going to negotiate. Lucas: You should. And the data gives you leverage. If your landlord tries to push a 7 percent increase, you can point to the national numbers and say the market is cooling. Luna: Speaking of leverage, I want to touch on something that's been on my mind. This show is completely ad-free — no sponsor breaks, no insurance commercials. A handful of listeners help make that possible through buy me a coffee dot com slash fexingo. And honestly, that support is what lets us keep digging into these numbers without anyone telling us what to say. Lucas: It's true. We don't have an ad team breathing down our necks. The people who chip in are the reason we can spend ten minutes on shelter inflation versus wage growth. So if you've gotten something out of this episode, that's the place to go. No pressure, just putting it out there. Luna: Right. And back to the data — one more thing that gives me hope. The 10-year breakeven inflation rate, which is essentially the market's expectation for inflation over the next decade, is at 2.39 percent. That's down from 2.40 last month. So the bond market thinks inflation is heading toward the Fed's target. That would mean rent increases should keep slowing. Lucas: Assuming the Iran situation doesn't blow up energy costs again, yeah. But that's a risk we have to keep an eye on. For now, though, the wage-rent story is genuinely encouraging. After three years of feeling like you're running on a treadmill, the treadmill is finally slowing down while you're speeding up. Luna: That's a good image to end on. Let's see if it holds next month. Lucas: We'll be watching. Thanks for listening.