U.S. wage growth is slowing after inflation-adjusted pay fell in July

U.S. workers earned more in dollar terms in July, but their average hourly purchasing power slipped as consumer prices rose faster than pay.

The Bureau of Labor Statistics reported Aug. 12 that real average hourly earnings for all private-sector employees fell 0.1% from June to July, after adjusting for inflation. Real hourly earnings were down 0.2% from July 2025 to July 2026.

The figures show why a raise on a paycheck does not always translate into greater buying power. Nominal average hourly earnings rose 3.2% over the year to $37.62, according to the BLS. But the Consumer Price Index for All Urban Consumers increased 3.4% over the same period.

What changed in July

The monthly decline in real hourly earnings was small, but it reflected a gap between pay and prices. Average hourly earnings increased 0.1% from June to July, while the CPI also rose 0.1%.

Real average weekly earnings were unchanged over the month. That measure combines hourly pay with the average workweek, so it can move differently from hourly earnings. The average workweek itself was unchanged at 34.3 hours in July.

Over the year, real average weekly earnings increased 0.1%. The weekly result was helped by a 0.3% increase in the average workweek over the same period, which partly offset the 0.2% decline in inflation-adjusted hourly earnings.

Why weekly pay looked better

Working more hours can raise weekly earnings even when each hour buys slightly less. In July, the average workweek for private-sector employees was unchanged from June, according to the BLS. Compared with a year earlier, however, the average workweek was 0.3% longer.

That does not mean every worker worked more hours or saw higher weekly pay. The BLS numbers are national averages for private-sector employees, and individual results vary by occupation, industry, employer, hours worked and wage changes.

What the inflation adjustment means

Real earnings are nominal earnings adjusted to account for changes in consumer prices. They are intended to show how the purchasing power of pay changes over time, rather than whether the dollar amount on an individual paycheck went up or down.

The CPI is also a broad national measure. Household budgets differ, so workers whose spending is concentrated in categories that rose faster than the overall index may feel more pressure, while others may see a different result.

The July CPI rose 0.1% during the month. Shelter accounted for roughly two-thirds of that increase. The food index also rose 0.1%, while food-at-home prices fell 0.1%. Energy prices fell 1.5% in July but were still up 14.7% from a year earlier.

Labor-market context

The pay figures arrived as layoffs remained relatively low. The Associated Press reported that initial unemployment claims fell to 206,000 in the latest week covered by its report, from a revised 212,000 the week before. Claims are a measure economists use to track the pace of layoffs, but they do not show how quickly employers are adding new workers.

The broader jobs data are subject to revisions as additional information becomes available. The BLS revised May and June payroll gains lower by a combined 103,000 jobs in its July employment report.

What to watch next

The next major federal checkpoint is the BLS Employment Situation report for August, scheduled for Sept. 4, 2026, at 8:30 a.m. Eastern time.

That report will provide new information on average hourly earnings, the length of the workweek, payroll employment and unemployment. It will not confirm a forecast in advance, but it will help show whether July’s gap between wage growth and inflation was temporary or part of a broader cooling in worker purchasing power.

Sources

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