Allianz chief economic adviser Mohamed El-Erian said in an interview that the inflation problem in the United States will inevitably turn into a cost-of-living crisis as price pressures become broader, further erode the wage gains of many American households, and dent demand.
Wages have been on the rise as businesses boost pay to attract and retain badly-needed staff in the wake of the post-pandemic rebound in demand. But the higher pace of inflation has eroded those gains, pushing real wages—or those adjusted for inflation—into negative territory.
The average U.S. employee made $31.85 an hour in April, according to a May 6 report from the Bureau of Labor Statistics, which is a 5.5 percent increase from April of last year when the average was at $30.20 an hour. At the same time, consumer price data released on May 11 shows that the pace of inflation within the same period came in at 8.3 percent, which means that inflation effectively gave the average worker a pay cut of 2.8 percent.
…