Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating the Cost of a Night Out
Transcript
- Lucas: So the latest CPI came out last month, and one line in the data caught my eye. The overall index actually ticked down to 332.6, but the thing is, core inflation — ex food and energy — barely budged. It's still sitting just above 336. Luna: Right, and that's the 'sticky' part of inflation the Fed keeps talking about. Services, rent, things you can't easily outsource. Lucas: Exactly. But within that sticky services bucket, there's one category that's actually behaving pretty well for workers right now: the cost of a night out. I'm talking about bars, restaurants, live music — the stuff you do when you're finally off the clock. Luna: Okay, I'll bite. What does the data say? Lucas: Well, average hourly earnings for private workers hit $37.60 in June. That's up about 2.4 percent year-over-year. Meanwhile, the cost of food away from home — that's restaurant meals — rose only about 2.1 percent over the same stretch. So your raise is actually outpacing the price of going out. Luna: Huh. So the 'funflation' narrative might finally be reversing? Because for a while there, it felt like every concert ticket or cocktail was up 20 percent. Lucas: That was true in 2022, 2023. But look at the recent Fed Beige Book — the one that came out last week. They actually noted that the World Cup gave bars and restaurants a needed boost, but they also said consumers are flashing warning signs. So the demand is there, but it's fragile. Luna: Fragile how? Are people trading down? Lucas: Some of that. The Fed's own contacts reported that while foot traffic was up during the World Cup matches, the average ticket per customer was flat or slightly down. People are still going out, but they're ordering one fewer round, maybe skipping the appetizer. Luna: That makes sense. So the wage gains are real, but consumers are still cautious. They're not splurging the way they might have a few years ago. Lucas: Right. And the flip side is that restaurants are also feeling cost pressure from other directions. Import prices — especially from China — just hit their highest level since 2008. That's going to feed into everything from glassware to specialty ingredients. Luna: So if you're a bartender or a server, your hourly wage is going up. But the owner is seeing higher costs on the supply side. Something's got to give eventually. Lucas: Exactly. The question is whether the wage growth can keep outpacing menu price increases. And the data suggests maybe not forever. The employment cost index for wages is at 177.5, up from 176.2 at the start of the year. That's still positive, but the pace of increase has slowed. Luna: Because the labor market is cooling, right? Job openings are down, hiring is slower. So the bargaining power workers had two years ago is fading. Lucas: That's the concern. If wage growth slows further while import tariffs — like the ones Trump just floated on generic drugs from 2028, but with a two-year delay — start to push costs up, then the equation flips. Suddenly your raise doesn't go as far at the local pub. Luna: So for now, the window is open. Workers can actually enjoy a night out and feel like they're not losing ground. But it might not last. Lucas: Right. And the data this month shows core PCE — the Fed's preferred gauge — is still running at 130.1, up from 129.67. So underlying inflation hasn't been vanquished. It's just resting. Luna: Which brings us back to the consumer caution. People sense that even if the numbers look okay today, the future is uncertain. That's why they're not going all out. Lucas: Yeah. And you know, if today's conversation made something click for you — maybe you're a bartender or just someone who likes going out — and you found it worth a coffee, you can show that at buy me a coffee dot com slash fexingo. It's a small way to keep this show ad-free and independent. Luna: I'll second that. We don't run ads, so listener support is what keeps the lights on. And every bit helps. Lucas: So back to the night out: the next thing to watch is the tariff timeline. If the delayed tariffs on Chinese goods take effect in 2028, that's two years away. But the announcement itself can change expectations. Restaurants might start raising prices preemptively. Luna: And if they do, then that wage advantage we just talked about could evaporate. So enjoy that happy hour while it lasts, I guess. Lucas: Exactly. The data today says your raise is beating the cost of a night out. But the data tomorrow? It's a different story. Keep your eye on import prices and the Fed's next move.