American workers are reliving the past – and that’s a potentially big problem. 

The reason: Real wages adjusted for inflation have recently declined, in some cases, significantly. As seen in the chart, the real wages most workers took home as of late April are the same as they were back in late 2016 and early 2017.

Put another way: Thanks to the pandemic and sharply higher inflation, some workers have lost roughly five years of wage gains.

The “bright spot” is that the lowest-earning workers have fared a little better—losing around two-and-a-half years’ worth of wage gains.

As we’ve noted, the U.S. consumer will likely be the driving force behind the economy for the foreseeable future. Given the real wage trends shown to the right, it’s worth asking: How robustly will consumers spend when their inflation-adjusted paychecks look like they did when Snapchat started publicly trading?


1 https://www.atlantafed.org/chcs/wage-growth-tracker

This commentary is written by Horizon Investments’ asset management team.

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