Americans' Dollars Stretched Further In August On Wage Gain And Price Fall

Wages for American workers increased the most in August of any month in more than two years -- while an unexpected fall in prices stretched everyone’s dollars further -- though the growth still isn't what economists would like, the Labor Department said Wednesday.

Earnings rose an average 0.4 percent in August from July, adjusted for prices, the largest one-month increase since November 2012. Wages also rose 0.4 percent from a year ago.

“August was a better month for real income growth,” Gus Faucher, senior economist at PNC Financial Group, said. “But wage growth remains a little disappointing.”

Consistent year-over-year growth of above 1 percent would be healthy, but the economy hasn’t seen that kind of growth since the 1990s, Faucher said.

Meanwhile, prices fell 0.2 percent last month, the Labor Department said, primarily because food prices increased a mere 0.2 percent and gasoline prices fell 4 percent as tensions in the Middle East and Russia eased somewhat. Small upticks in rent prices and new car prices were offset by a nearly 5 percent drop in airfare. Core prices, which exclude food and energy prices, didn’t rise at all for the first time in four years.

The latest data will ease pressure on the Federal Reserve, which will announce its policy Wednesday afternoon, to raise interest rates sooner rather than later next year.