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 Laptop
Transcript
- Lucas: Last week, the average price of a laptop computer at retail fell below $700 for the first time since 2021. That stood out, because at the same time, import prices from China hit their highest level since 2008. So we get these two signals that seem to point in opposite directions — and inside that contradiction is a really good story about where workers' paychecks actually go further. Luna: I’ve been watching laptop prices drift down for a while, but didn’t realize they’d gotten that low. What’s the main driver — is it just cheaper components or something else? Lucas: A big part is the global chip glut we’ve been in since late 2023. Memory and processors got a lot cheaper, and that flows straight into the final price. But there’s also the fact that brands like Dell and Lenovo have been cutting prices to move inventory ahead of more tariffs. The administration's new global tariff on Chinese goods is scheduled to ramp up next year, so retailers are front-loading discounts. Luna: Right, so the tariff threat is actually creating a sale for now. But let’s talk about the worker side — average hourly earnings just ticked up to $37.60 in June. How much more laptop can a typical worker buy than, say, a year ago? Lucas: Let’s do the math quickly. A year ago, the average laptop was around $780, and hourly earnings were about $36.80. So a worker needed about 21.2 hours of work to buy one laptop. Today at $700 and $37.60 an hour, it’s about 18.6 hours. That's a saving of roughly two and a half hours of work per laptop. In percentage terms, the price fell about 10% while earnings rose about 2% — so real purchasing power for laptops is up close to 12% year-over-year. Luna: That’s a real pickup. And what’s interesting is that the overall CPI actually fell from 333.98 in May to 332.6 in June — that’s a 0.4% drop. So a lot of goods are getting cheaper, not just laptops. Lucas: Exactly. Core CPI — excluding food and energy — was basically flat, down just a hair to 336.1. So the trend is that goods deflation is continuing, while services inflation is still sticky. But for a category like electronics, which is heavily exposed to global supply chains, the price declines have been pretty persistent. Luna: And that’s where the tariff story gets complicated. If tariffs push import prices up, do we expect laptop prices to reverse course later this year or next? Lucas: That’s the big open question. The breakeven inflation rate — basically the market’s expectation for average inflation over the next ten years — has actually been falling slightly, down to 2.26%. So bond traders aren't betting on a big tariff-driven spike. But if the tariffs are broad and stick, some of that import cost will eventually hit consumer prices. For now, laptop makers have some room because their margins are fairly healthy, but it’s worth watching. Luna: So the window for a good laptop deal might be right now. Which brings us to something else — the broader idea of what a raise can actually buy. You mentioned a couple times that these episodes are possible because of listener support, and I think it’s worth pointing out that a few dollars a month is genuinely what keeps the show ad-free and independent. Lucas: Yeah, it’s true. If you’ve gotten something out of these conversations, buying us a coffee at buy me a coffee dot com slash fexingo — that's buy me a coffee dot com slash fexingo — makes a real difference. It keeps us from having to tack on sponsors or compromise the format. Luna: And it’s not about big pledges. Even a one-time three-dollar coffee helps cover hosting and research. So thank you to everyone who already has. Lucas: Alright, back to laptops. One more angle I want to hit: the median usual weekly earnings number — that hit $1,204 in early 2025 and has likely crept up since. That means a median worker today earns enough in a week to buy about 1.7 laptops at current prices. Two years ago, that same weekly paycheck would have bought maybe 1.3 laptops. Luna: So even if inflation hasn't vanished, for a specific big-ticket item like a laptop, the worker's purchasing power is clearly improving. That’s a tangible win. Lucas: It is. And it’s not just laptops — we’ve seen similar trends with TVs, smartphones, even some appliances. The common thread is that goods exposed to global competition tend to get cheaper over time, especially when the dollar is strong and commodity prices are stable. Luna: But services keep going up — rent, healthcare, education. So the headline 'your raise is beating the cost of a laptop' is true, but it’s not the whole picture. Lucas: Right, and that’s exactly why we do this show item by item. The overall CPI might be cooling, but your personal inflation rate depends on what you buy. If you’re spending a lot on housing and education, your raise might still feel tight. But if you're in the market for a new laptop, you're in luck. Luna: Let’s talk about the employment cost index — that’s a broader measure of worker compensation. It rose to 177.5 in the first quarter of this year, up from 176.23. That’s about a 0.7% increase in one quarter, which is moderate. Employers aren't handing out huge raises, but they're keeping up with inflation. Lucas: And the Fed watches that index closely because it's a leading indicator for wage-driven inflation. The fact that it's rising slowly, combined with falling goods prices, is actually a pretty good environment for workers. The risk, of course, is if tariffs reignite goods inflation down the line. Luna: One last data point I want to bring in — the 10-year breakeven inflation rate at 2.26% suggests the market expects inflation to stay around the Fed’s target. So maybe the laptop price drop isn't a fluke; it's part of a broader normalization. Lucas: Exactly. The PCE price index, which is the Fed’s preferred gauge, is up just a bit to 131.5 in May from 130.94. Core PCE is at 130.1, basically flat. So when you look at the full picture — wages up, goods prices down, services inflation moderating — the narrative that your raise is finally beating prices on some key items holds up. Luna: That’s a good note to end on. Next time, we’ll tackle another item from the shopping basket — maybe something you wouldn’t expect. Lucas: Sounds like a plan. Thanks for listening.