{"id":353028,"date":"2025-12-16T23:59:14","date_gmt":"2025-12-16T23:59:14","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/353028\/"},"modified":"2025-12-16T23:59:14","modified_gmt":"2025-12-16T23:59:14","slug":"the-no-1-cause-of-americas-affordability-problem-just-got-worse-money-news","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/353028\/","title":{"rendered":"The No. 1 cause of America\u2019s affordability problem just got worse | Money news"},"content":{"rendered":"

(CNN) \u2014 America\u2019s cost-of-living problem<\/a> is simple math: Inflation spiked several years ago and paychecks haven\u2019t had enough time to catch up.<\/p>\n

The latest jobs report<\/a> revealed Tuesday that the problem got even worse last month \u2013 and a separate inflation report Thursday could show that the crunch is really on.<\/p>\n

American workers made an average of $36.86 an hour in November, up 3.5% over the past year, the Bureau of Labor Statistics reported Tuesday. That may sound like a nice raise, but it\u2019s barely enough to keep pace with the 3% annual gain in consumer prices. And it was the lowest annual paycheck growth that Americans have had since May 2021.<\/p>\n

And, of course, that\u2019s just an average, boosted by a 4% wage gain last month among top earners, Bank of America\u2019s deposit data showed. Middle-income household paycheck gains were just 2.3%, and low-income households gained just 1.4% in pay over the past year.<\/p>\n

Smaller raises and rebounding inflation are fueling America\u2019s cost-of-living problems.<\/p>\n

\u201cWage growth is easing into a sustained affordability crisis,\u201d said Joe Brusuelas, chief economist at RSM US.<\/p>\n

The annual growth in American workers\u2019 hourly pay topped out at 5.9% in March 2022 \u2013 which was never sustainable \u2013 but has been steadily falling ever since. That trend is, in part, a result of smaller cost-of-living adjustments as inflation has returned to near-normal from the four-decade high set in June 2022.<\/p>\n

But sinking wage growth is also a result of a worsening job market<\/a>. The US economy has lost jobs<\/a> in three of the past six months, and 2025 is on pace to post the worst job growth since the pandemic wiped out a record number of jobs in 2020.<\/p>\n

People are staying in their jobs for longer: The rate of workers who voluntarily quit their jobs fell to a five-year low<\/a> in October, the US government reported last week. If employers aren\u2019t losing workers, there\u2019s less incentive to give them big raises to stick around.<\/p>\n

That\u2019s why Federal Reserve Chair Jerome Powell said last week<\/a> that the best way to fix Americans\u2019 cost-of-living concerns is to boost the job market.<\/p>\n

The Fed cut interest rates in three straight meetings, aiming to lower the cost for businesses to borrow money. In theory, that should free up more capital for employers to spend on hiring. A better labor market would give Americans more choices in jobs, increasing the amount of pay companies would need to shell out to keep and attract workers.<\/p>\n

If that keeps up, then, over time, people will adjust to costs that have stayed elevated after the price shock from a few years ago. Those prices will feel relatively affordable as their paychecks grow, Powell argued.<\/p>\n

\u201cWe are going to need to have some years where real compensation is higher \u2026 for people to start feeling good about the affordability issue,\u201d Powell said last week at a press conference after the Fed cut rates. \u201cWe are trying to keep inflation under control, but also support the labor market and strong wages, so that people are earning enough money and feeling economically healthy again.\u201d<\/p>\n

But there\u2019s another side of the equation, too: prices, which have been creeping higher in recent months. After falling to a four-year low of 2.3% in April, annual inflation is right back to the 3% level where it started when President Donald Trump took office again in January.<\/p>\n

The good news, according to Powell, is that this increase is entirely due to Trump\u2019s tariffs, which, in theory, will not add to long-term inflation problems: Prices will go higher once, and the new rate will set in. Tariffs do not keep prices rising indefinitely.<\/p>\n

The bad news is that prices may still have some room to run higher from their current levels. Companies have eaten roughly 80% of Trump\u2019s new tariffs thus far<\/a>, their profit margins are shrinking, and they\u2019ll begin passing much of those costs on to consumers in the form of higher prices next year, according to JPMorgan.<\/p>\n

Thursday\u2019s Consumer Price Index report is expected to show that annual inflation rose to 3.1%, further narrowing the gap between paycheck growth and price increases. Both trends are pointing in the wrong direction, exacerbating perceptions that America\u2019s cost of living is no longer affordable.<\/p>\n

The-CNN-Wire<\/p>\n

\u2122 & \u00a9 2025 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.<\/p>\n

\u200bTHE-CNN-WIRE (TM) & \u00a9 2025 CABLE NEWS NETWORK, INC., A TIME WARNER COMPANY. ALL RIGHTS RESERVED.<\/p>\n","protected":false},"excerpt":{"rendered":"(CNN) \u2014 America\u2019s cost-of-living problem is simple math: Inflation spiked several years ago and paychecks haven\u2019t had enough…\n","protected":false},"author":2,"featured_media":353029,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101],"class_list":{"0":"post-353028","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/353028","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=353028"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/353028\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/353029"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=353028"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=353028"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=353028"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}