Figure 10-4: How inflation affects growth in real average hourly earnings
Changes in consumer price inflation have an often significant effect in reducing average hourly earning gains (in dollar terms—solid line) to real average hourly earnings, or individuals’ unit purchasing power (dotted line).
Current Comment: Individuals’ year-over-year average hourly wage growth accelerated to over 4% by late 2006 from only 2% two years ago. With inflation (the difference between the black and green lines in this chart), despite pressure in energy prices, having fallen to only 2% during the past two years, year-over-year real hourly wage growth is now growing at 2% or more, its strongest gains since the late 1990s.
