Wages and salaries rose 0.4 percent in May, extending a run of solid monthly gains and continuing to outpace inflation, according to Commerce Department data released Friday. With core consumer prices rising just 0.2 percent last month, the latest wage increase represents a real gain in purchasing power for American workers.
The increase marked the second consecutive month of 0.4 percent wage growth, driven by steady hiring and rising pay in both goods-producing and services industries. Private sector payrolls led the way, with services-producing industries adding $35.9 billion in wages and goods-producing industries contributing $7.5 billion. Wages and salaries rose 0.5 percent in February and March.
But despite the strength in wages, total personal income fell by $109.6 billion, or 0.4 percent, as temporary government support programs expired. Disposable personal income—what households keep after taxes—dropped by an even steeper 0.6 percent.
The decline was concentrated in government transfer payments, which fell $111.3 billion in May. The largest driver was a sharp drop in Social Security outlays, following the expiration of temporary supplements enacted under the Social Security Fairness Act. Those extra payments had boosted household income earlier in the spring but were not repeated in May.
Farm income also contributed to the decline. Proprietors’ income from farming fell $41.2 billion, as support from the Emergency Commodity Assistance Program, part of the American Relief Act, was phased out.
The result is a mixed picture: private-sector wage growth remains healthy and inflation-adjusted gains are still accruing to workers, but the overall drop in income could weigh on consumer spending, especially if real income growth slows in future months.
Adjusted for inflation, real disposable personal income fell 0.7 percent, and real consumer spending declined 0.3 percent—both negative signs for short-term economic momentum.
Policymakers will likely view the strong wage data as a signal of continued labor market resilience, but the drop in income tied to government support programs may muddy the waters as the Fed weighs its next move on interest rates.
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