Labor data show real wages down for private and public sector workers

Americans are taking home larger paychecks, but those dollars buy less than they did a year ago, according to new data from the U.S. Department of Labor.

The Employment Cost Index, which the department released this week, tracks the total cost of labor including wages and benefits. Over the 12 months ending in September, total compensation for civilian workers increased by 3.4%. Wages and salaries specifically rose by 3.1%, while the cost of benefits climbed by 3.9%.

Despite these percentage gains, the report indicates that real wages have declined when adjusted for inflation. For private-sector workers, real wages and salaries fell by 0.6% over the past year. State and local government employees saw a similar trend, with real wages slipping by 0.5%.

This data suggests that price increases for goods and services are moving faster than pay raises. The Federal Reserve monitors the Employment Cost Index closely to understand wage pressures in the economy. The central bank raised its benchmark interest rate six weeks ago, the first increase since 2023, in an effort to control inflation. Officials noted that another rate hike could occur later this year.

The findings come after government reports showed that consumer inflation accelerated in September as costs for goods and services continued to rise. For households in Burlington and across Vermont, the numbers mean that while gross income is up, the actual amount available for spending has contracted. The report underscores the ongoing tension between rising living costs and wage growth.