Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of Groceries
Transcript
- Lucas: You know, for the past few years, every time we've talked about a specific category—cars, rent, coffee—the story was mostly the same: wages are catching up, but slowly. This week, I want to look at something that hits almost every household: groceries. Luna: Finally. I feel like the grocery store is where inflation really stings. So you're telling me our raises are actually starting to cover the bill? Lucas: Exactly. And the data backs it up. Average hourly earnings for private workers hit $37.60 in June, up from $37.51 the month before. Meanwhile, the Consumer Price Index actually dipped slightly to 332.6, down from 333.98 in May. So that gap between what we earn and what we pay for groceries is finally closing. Luna: Wait—so overall prices are falling? That seems counterintuitive with all the headlines about tariffs and supply chains. Lucas: Headline CPI is down a bit, but core CPI—which excludes food and energy—held steady. The dip is partly due to falling energy prices. But groceries? Food-at-home prices actually edged down 0.1% month-over-month in June. Not a huge drop, but after two years of relentless increases, it's a welcome change. Luna: So the combination of rising wages and falling food prices means real purchasing power for groceries is improving. What does that look like in dollars? Lucas: Take a typical worker earning the median weekly wage of $1,204. If grocery inflation is running at just 1% annually instead of the 4% we saw in 2023, that worker is effectively gaining about $12 a week in real terms. Not a windfall, but it adds up to over $600 a year. Luna: That's real money for a family. But not all groceries are created equal. What about tariffs on imported goods? I saw that import prices from China hit their highest since 2008 last month. Lucas: Good question. Most of our groceries are domestic or from nearby countries—Mexico, Canada. Fresh produce might see some pressure if tariffs expand, but staples like bread, milk, and eggs are less exposed. The bigger factor is energy costs, which affect transportation and packaging. And energy prices have been easing. Luna: So is this sustainable? Or are we just seeing a temporary lull before another spike? Lucas: That's the million-dollar question. The employment cost index for wages, which is a broader measure of what employers pay, rose to 177.5 in January—that's up 1.3% from the previous quarter. Meanwhile, core PCE inflation, the Fed's preferred gauge, is running at just 2.2% annually. So structurally, wages are growing faster than prices. But geopolitical risks, like the Singapore tightening or the new tariff headlines, could reignite inflation. Luna: So for now, the grocery aisle is giving workers a break. But it's fragile. Lucas: Exactly. And that's why it's worth appreciating while it lasts. For the first time in a long time, a raise actually feels like a raise when you go shopping. Luna: I'd love to see this trend hold through the end of the year. If food prices stay flat and wages keep creeping up, that's a real boost to consumer confidence. Lucas: And to think, we keep bringing you these conversations without any ads interrupting—kind of like how your grocery bill is less interrupted by inflation now. We're able to do that because listeners who find value in it chip in at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to support the kind of independent economics coverage you don't get elsewhere. And honestly, it keeps the show exactly what it is: focused on the numbers that matter to your wallet. Lucas: Right. So back to those numbers—let's talk about what happens if tariffs do start pushing up grocery prices. The Fed is watching core PCE closely. If food costs rise again, it could delay rate cuts. Luna: Which would make it harder for workers to keep up, even with wage gains. Lucas: Exactly. The key variable is how much of the tariff cost gets passed through to consumers. Right now, the big story is that wages are winning. But it's a narrow lead. Luna: So for listeners, what's the one thing to take away from this episode? Lucas: That if your raise this year is around 3% or more, and your grocery bill isn't going up, you're actually gaining ground. That hasn't been true for most of the past five years. Enjoy it while it lasts. Luna: And we'll keep tracking it. Thanks, Lucas. Lucas: Thanks, Luna. See you next episode.