Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating Imported Goods Prices
Transcript
- Lucas: So here's a stat that stopped me this week. Average hourly earnings hit thirty-seven dollars and sixty cents in June, up from thirty-seven fifty-one in May. That's a pretty modest bump, but look at what happened to consumer prices overall — the CPI actually dipped a bit, down to 332.6. So for the first time in a while, wage growth is running ahead of overall inflation, and there's a specific category where that gap is really opening up: imported goods. Luna: You're talking about that headline from Friday — import prices posting a surprise gain, and costs from China hitting the highest level since 2008. That does not sound like a good thing for shoppers. Lucas: Right, on its face it sounds bad. But here's the twist. Import prices have been climbing, yes — but wages have been climbing faster. So your raise is actually beating the price of imported stuff. And that hasn't been true for a long time. Luna: Walk me through that. Because when I hear 'imports from China at highest since 2008,' I think 'everything at the store is about to get more expensive.' Lucas: It depends on the lens. If you're an importer, you're paying more. But if you're a worker earning a paycheck, the question is whether your nominal wage is growing faster than those prices. And right now, it is. Let me give you a concrete example. Say you buy a lot of household goods — furniture, electronics, clothing — a lot of that comes from China. The import price index for Chinese goods is up about four percent year-over-year. But average hourly earnings are up about four and a half percent over the same period. Luna: So you've got a half percentage point cushion. That's not huge, but it's real. Lucas: Exactly. And when you factor in that core CPI — excluding food and energy — actually ticked down in June, that cushion gets a little wider. The cost of imported finished goods, especially consumer durables, is still elevated, but your paycheck is inching ahead. That's the opposite of the last couple of years, where import prices surged and wages lagged. Luna: So what changed? Is this the strong dollar finally doing its thing? Lucas: Partially. The dollar has been pretty strong relative to a lot of currencies, which makes imports cheaper in dollar terms. But the China number is interesting — it's not just currency. There's a mix of tariffs still in place, supply chain shifts, and some commodity cost pass-through. The headline about Chinese goods hitting a 2008 high sounds alarming, but the actual month-over-month increase was pretty small. What's more important is the trend. Luna: And the trend is that wages are finally winning this one. But is it sustainable? I mean, if the economy slows and wage growth stalls, we're right back where we started. Lucas: That's the million-dollar question. The Fed's Beige Book from last week noted that consumer spending is showing some warning signs — bars and restaurants got a World Cup boost, but overall retail was mixed. If demand softens, wage growth could moderate. And if geopolitical stuff — like the Hormuz situation — pushes energy or shipping costs up again, import prices could accelerate. Luna: So this window where your raise beats import prices might not stay open forever. Lucas: Probably not. But for right now, in mid-2026, it's a real thing. Median usual weekly earnings are up to twelve hundred and four dollars, and that's a four percent gain year-over-year. That beats core CPI, which is barely moving. And it beats import price inflation, which is positive but slower than wages. Luna: So if I'm a listener, what's the takeaway? Should I feel good about buying imported wine or a new phone? Lucas: I'd say you can feel a little less bad than you did last year. The real wage for imported goods is improving. But it's marginal — we're talking about a few tenths of a percent. The bigger story is that the gap has closed. It's not that you're getting a great deal on imports; it's that your income is no longer falling further behind. Luna: And that's genuinely new. For the last three years, it felt like every trip to the store was a reminder that your money bought less. Now the script has flipped, at least for this category. Lucas: Yeah. And that's the kind of shift that shows up in consumer confidence surveys. People start to feel like their financial situation is stabilizing. It's not boom times, but it's a break from the erosion. Luna: You know, speaking of things that make a real difference — a couple of dollars a month is genuinely what keeps this show going. If you've gotten something out of our economics coverage, consider tossing a few bucks into the tip jar at buy me a coffee dot com slash fexingo. It's how we stay independent and ad-free. Lucas: Yeah, listener support really does add up. Even small contributions help us keep the lights on and keep digging into numbers like these. So if you value what we do, that's the place. Luna: Alright, back to the data. One thing I want to dig into — the wholesale price report from last week showed an unexpected decline of 0.3 percent in June, driven by a big drop in gasoline. Does that filter down to consumer import prices? Lucas: It can, but it's not automatic. Wholesale prices for finished goods include a lot of domestically produced stuff. For imports, the big component is industrial supplies and materials — and that's where you see the energy pass-through. If gasoline prices fall, that lowers transportation costs, which eventually shows up in the price of imported goods. But the lag is a few months. Luna: So we might see import prices soften later this year if energy stays down. Lucas: That's the hope. The ten-year breakeven inflation rate is at 2.24 percent — that's up a tick from last week, but still below where it was in 2022. The market is basically pricing in that inflation is under control. If energy cooperates, that gap between wage growth and import price growth could widen. Luna: And if it doesn't cooperate, we're back to the squeeze. But for now, workers have a small win. Lucas: A small win, but a meaningful one. Especially because it's not just about the numbers — it's about the feeling that the economy isn't actively working against you every time you buy something made overseas. Luna: And that feeling is worth a lot more than a few basis points. Lucas: Yeah. So the big question going forward is whether this is a blip or the start of a new phase. The China growth story is slowing — their quarterly growth was the weakest since 2022 — and that could put downward pressure on their export prices. Combined with a strong dollar, that could keep import inflation tame. Luna: But tariffs are still there, and geopolitical risk is real. Lucas: Exactly. So the window is open, but it's not locked. If you're a worker, enjoy the relief while it lasts. If you're a policymaker, this is the time to lock in conditions that keep wage growth ahead of prices — not just for imports, but across the board. Luna: Alright, that's a good place to leave it. Thanks for breaking that down, Lucas. Lucas: Always a pleasure. We'll be back tomorrow with another angle on the economy that affects your wallet.