U.S. Economy Grew in the Last Quarter, but Wages Are Still Losing to Inflation

The US economy continued to grow during the second quarter of 2026, but new official data show that this progress still has not translated into clear relief for workers’ wallets.

• Why it matters: The economy is still expanding and consumers continue spending. However, wages are not keeping pace with rising prices, limiting how much families can actually buy with their income.

Wages Are Rising, but Prices Are Increasing Faster

The average wage for private-sector workers reached $37.62 per hour in July, up from $36.47 a year earlier. That represents a 3.2% increase over 12 months, according to the Bureau of Labor Statistics (BLS).

The problem appears when that increase is compared with the cost of living.

Consumer prices rose 3.4% over the same period, slightly faster than wage growth.

• In simple terms: the average worker earned more dollars per hour, but those dollars also bought less because prices increased.

The BLS calculates that effect directly. After adjusting for inflation, real hourly earnings fell 0.2% compared with July 2025.

Higher Income Did Not Mean Greater Purchasing Power

The report released Wednesday by the BEA offers another sign of the pressure reflected in US wages and inflation.

Personal income increased 0.4% in July, driven mainly by higher compensation, government benefits and income from assets. Disposable income after taxes also rose 0.5%.

But after accounting for rising prices, real disposable income was virtually unchanged during the month.

That helps explain a situation many families may recognize: receiving a little more money does not necessarily mean being able to buy more when prices are also rising.

Health Care, Housing and Services Take Up More Household Spending

Americans continued spending in July, but the data show important differences in where that money went.

Consumer spending increased by $36.3 billion, according to the BEA.

• Behind that result was an $86.2 billion increase in services, partially offset by a $49.9 billion decline in spending on goods.
• Services that recorded increases included financial services and insurance, health care, as well as housing and utilities, according to the agency’s breakdown.

At the same time, spending declined in categories such as gasoline and other energy products, vehicles, furniture and recreational goods.

This means spending is not increasing evenly across the economy. A significant share is shifting toward services, including some tied to routine household needs.

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Economy Grows, but US Wages and Inflation Keep Household Budgets Tight

Consumer spending also helped the US economy grow during the second quarter. The BEA said consumer spending, exports and investment boosted GDP, while government spending declined.

#Atento l During the second quarter, the U.S. GDP grew 1.5% and the underlying PCE inflation was 3.4%. Both met expectations exactly, while the GDP deflator rose to 6.4%, slightly exceeding the estimated value pic.twitter.com/ud0Ro85l7E

— Diario La República (@larepublica_co) August 26, 2026

The data therefore show two realities at the same time.

• The United States continues to grow and households are still spending, but prices rose faster than wages over the past year.
• For families, that difference is ultimately what matters: not only how much pay increases, but how much that money can actually buy after paying for housing, health care, food and other everyday expenses.