Data from the OECD shows that real wages and GDP are growing faster in the US than in the other G7 countries. Getty Images/Alexander Spatari
The US has seen the highest real wage growth of any G7 country over the past four years.
Real wages have risen on an annualized basis in the past two months for the first time in 26 months.
The US also tops the G7 countries in GDP growth and a measure of inflation.
This is a machine translation of an article by our US colleagues at Insider. It was automatically translated and checked by a real editor. We welcome feedback at the end of the article.
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This is the economic situation in the G7 countries
The US has outperformed the rest of the G7 countries in gross domestic product growth and harmonized inflation, which offsets differences in each country’s methods of calculating inflation.
Now show Data from the Organization for Economic Co-operation and Development (OECD) from 2022 that the percentage change in inflation-adjusted wages in the US since 2019 has outpaced that of the other G7 countries. The G7 is an informal association of prosperous and industrialized democracies.
Real wages in the US were 5.8 percent higher in 2022 than in 2019, followed by Canada at 4.7 percent. The rest of the G7 countries were all in the red over this period.
Percentage change in real wages since 2019 in the G7 countries. Note: Data have been adjusted for cost of living in each country. Graphic: Noah Sheidlower/Insider. Data: OECD
The smallest percentage changes over the past four years have been in Italy and Germany, both down about 3 percent. According to the OECD, real wages have also fallen in other European countries, including Spain and Greece.
Overall, Europeans in recent years got poorerwith it falling consumer spending and supply chains still recovering.
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Americans’ real wages are rising more than inflation
In the US, real wages are improving after falling from 2021 to early 2023. Darren Grant, Associate Professor of Economics at Sam Houston State University, told Insiders earlier this monththat falling real wages has contributed to what has been dubbed the “vibecession” between economic performance and what Americans think about the economy.
In June, the US increased average real wages per hour by 0.2 percent compared to the previous month and by 1.2 percent compared to the previous year. This was the first time in 26 months that real weekly earnings rose significantly on an annualized basis.
Real wages in the US caught up with inflation in May for the first time in two years and rose 4.3 percent from May 2022. Prices rose just 4.0 percent this month. The consumer price index also rose 0.2 percent in May, up 3.0 percent year-on-year, a far cry from last year’s near double-digit inflation.
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Probability of a recession decreases
This is all good news for Americans, who have more purchasing power and less strain on their wallets. The US Federal Reserve is likely to hike rates again to keep inflation low, although strong CPI and jobs data could prompt the Fed to delay its second rate hike of the year.
Wage gains could increase spending, which could keep inflation above the Fed’s 2% target. Americans have spent more on retail, with the Retail sales up slightly in June and May sales revised up became. Consumers have spent less on groceries and gasoline and more on electronics and home appliances. The employment growth has slowed recently: only 209,000 new nonfarm payrolls were added in June, down from 306,000 in May.
With real wages rising over the past two months, Americans are beginning to feel better about the economy as the likelihood of a recession by the end of the year decreases.
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