The U.S. Bureau of Labor Statistics (BLS) has released its monthly update on real average earnings, highlighting a mix of trends for January 2025.
While hourly earnings saw a slight increase, real earnings, adjusted for inflation, remained mostly unchanged over the past month.
Here’s a breakdown of the data:
Real Average Hourly Earnings: Stability Amid Inflation
Real average hourly earnings for all employees were flat from December to January, after accounting for inflation. This static result stems from two key factors:
- 0.5% Increase in Hourly Earnings: A slight rise in wages across the board.
- 0.5% Rise in Consumer Prices: The inflation rate, as measured by the Consumer Price Index (CPI), offset wage gains.
The combination of these two factors meant that employees’ real buying power stayed steady.
Year-on-Year Wage Growth: A Modest Gain
On a year-over-year basis, from January 2024 to January 2025, real average hourly earnings increased by 1.0%. This gain reflects the overall trend of wages growing at a pace that slightly outpaces inflation.
- Wage Increase: The 1% rise in real hourly earnings represents a positive shift for workers.
- Average Workweek: However, the average workweek decreased by 0.3%, impacting overall weekly earnings.
In real terms, this combination led to a 0.7% increase in average weekly earnings for employees.
Weekly Earnings: A Decline in Average Hours Worked
Despite the modest rise in hourly earnings, average weekly earnings saw a small dip due to a shorter workweek. Here’s a look at the key points:
- Real Average Weekly Earnings: Decreased by 0.3% over the month, reflecting the shorter workweek.
- Average Workweek: Reduced by 0.3%, affecting total weekly pay.
Even with the increase in hourly wages, fewer working hours resulted in a slight reduction in weekly pay for the average worker.
Year-to-Year Change in Weekly Earnings
Looking at the broader trend over the past year, from January 2024 to January 2025, real average weekly earnings increased by 0.7%.
This was driven by the 1% increase in hourly wages, though the effect was muted by the decrease in work hours.
Earnings for Production and Nonsupervisory Workers
Production and nonsupervisory employees, who make up a significant portion of the workforce, saw similar trends in January.
Here’s the breakdown for this group:
- Hourly Earnings: Real average hourly earnings remained unchanged from December to January, with the same factors of rising wages and inflation balancing each other out.
- Weekly Earnings: These employees saw a 0.6% decrease in weekly earnings, due to a decline in the average workweek.
However, from January 2024 to January 2025, these workers experienced a 1.1% increase in real average weekly earnings.
This gain reflects the growth in hourly wages without any change in workweek length.
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What Does This Mean for Workers?
While wage growth continues, inflation has dampened the effects on real earnings, especially in the short term. A slight reduction in work hours across the board has also contributed to reduced weekly earnings.
Key Takeaways
- Flat Real Earnings: Real earnings stayed largely unchanged from December to January.
- Hourly Wage Growth: There was a modest increase in average hourly wages, helping workers keep up with inflation in the long run.
- Workweek Reduction: A shorter average workweek led to a slight decline in overall weekly earnings.
- Annual Earnings Growth: Over the past year, real wages and weekly earnings have shown a positive, albeit modest, increase.
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Looking Ahead
As inflation continues to rise and fall, wage increases may have to outpace price growth to make a meaningful impact on workers’ purchasing power.
While wages are up, many employees may still find their real earnings squeezed if inflation remains persistent. It will be interesting to see how these trends evolve in the coming months.
