Inflation and pay raises moved at different speeds for U.S. workers in September 2026. Federal data show average hourly earnings rose 3.0% over the year while consumer prices climbed 3.7%, leaving inflation-adjusted pay 0.7% lower. The figures explain why bigger paychecks did not necessarily mean greater purchasing power.
Key Takeaways
- U.S. real average hourly earnings declined 0.7% over the 12 months through September 2026, according to the Bureau of Labor Statistics.
- Consumer prices increased 3.7% annually, while nominal average hourly earnings grew 3.0%.
- Gasoline prices jumped 9.1% in September and 34.2% from a year earlier.
- Real average weekly earnings fell 0.5% in September, while producer prices rose 1.3%.
In September, U.S. workers’ average hourly pay rose more slowly than prices. The Bureau of Labor Statistics reported on October 14 that earnings increased 0.1% from August, compared with a 0.6% rise in the Consumer Price Index. Real hourly earnings, which account for changes in consumer prices, fell 0.5% for the month.
Over 12 months, the difference was smaller but persistent: hourly pay increased 3.0%, consumer prices climbed 3.7%, and real hourly earnings fell 0.7%. The findings cover private nonfarm payroll employees.
Inflation and Pay Raises Left Real Hourly Earnings Down 0.7%
Monthly figures show how raises lose value. The average hourly rate for private-sector workers reached $37.81 in September, up from $37.76 in August and $36.70 a year earlier. The higher dollar figure does not account for the price increases recorded over the same period.
The Consumer Price Index measures changes in the cost of a range of goods and services. The earnings adjustment uses that price measure to show how much average hourly pay can purchase. A decrease in real earnings means average wage growth did not match the overall rise in consumer prices.
September’s decline also followed a weaker August reading. Real average hourly earnings fell 0.1% from July to August, before the 0.5% September drop. On a year-over-year basis, real hourly earnings had declined 0.3% in August, compared with 0.7% in September.
These averages include changes in the mix of jobs and industries. They do not establish that all workers received a raise or that every household faced the national inflation rate.
Gasoline Prices Jumped 9.1% as Household Costs Increased
Gasoline was the clearest reason for September’s faster price growth. Its consumer price index surged 9.1% from August and 34.2% from September 2025. The Bureau of Labor Statistics said gasoline accounted for more than half of the month’s 0.6% rise in the overall consumer price index.
Other energy expenses increased at a slower annual pace. Electricity prices rose 4.4% from a year earlier, and natural gas service increased 5.0%. The energy index overall rose 5.2% for September and 20.4% over 12 months.
Energy prices outpaced wages in an earlier 2026 comparison, adding context to the latest gasoline increase. The impact on a household depends on how much it drives, the type of home it occupies and local utility costs.
Food moved differently. Grocery prices declined 0.1% in September and were up 1.8% over 12 months. Prices for food consumed away from home increased 0.2% during the month and 3.5% over the year, according to the same report.
Shelter costs rose 0.4% in September and 3.2% over the year. Prices excluding food and energy increased 0.3% for the month and 2.6% over 12 months. The latter measure indicates that price increases extended beyond the energy category, even though gasoline was the largest contributor to September’s monthly rise.
Longer Workweeks Failed to Prevent Lower Real Weekly Earnings
The difference between hourly and weekly earnings matters when assessing pay. Average weekly earnings reflect both the rate of pay and the hours worked. A longer workweek can raise total pay even if purchasing power per hour declines.
Average private-sector weekly hours stood at 34.4 in September, unchanged from August but higher than the 34.2 hours recorded a year earlier. Over the 12-month period, average hours increased 0.6%, helping lift nominal weekly earnings by 3.6%.
Once adjusted for inflation, however, real average weekly earnings fell 0.1% from September 2025. The monthly decline was sharper at 0.5%, consistent with the drop in inflation-adjusted hourly earnings while the average workweek stayed unchanged.
Production and nonsupervisory employees experienced a similar annual outcome. Their nominal average hourly earnings increased 3.3% over 12 months, but real hourly earnings fell 0.6% under the price index used for that group. Real weekly earnings declined 0.3% over the year.
The figures are national averages rather than changes in take-home pay. Taxes, payroll deductions, benefits and household income from other sources are outside the hourly earnings comparison. The data also do not identify whether changes in working hours were voluntary.
Business Costs Increased as Consumer Sentiment Declined
Cost pressure appeared in measures of business prices as well. The Producer Price Index for final demand rose 1.3% in September, its largest monthly advance since March 2022. Producer prices were 6.3% above their level a year earlier, the Bureau of Labor Statistics reported October 15.
Prices for final-demand goods increased 2.6% during the month, while prices for services rose 0.8%. Transportation and warehousing services climbed 3.4%. Producer prices are not retail prices, and a change at the business level does not necessarily produce an equal increase at checkout.
The figures followed higher services input costs reported in the Institute for Supply Management’s September survey. Its prices index rose to 74.0 from 72.6 in August. That reading indicates more widespread price increases among surveyed businesses, not a 74% jump in costs.
Consumer attitudes weakened alongside the price reports. The University of Michigan’s preliminary October consumer sentiment index declined to 46.3 from 48.1 in September. Its current conditions gauge fell to 44.7 from 50.9, while expectations for inflation over the next year rose to 4.7% from 4.6%.
Joanne Hsu, director of the university’s Surveys of Consumers, wrote that “Frustration over cost-of-living continues to mount” in commentary accompanying the October results. The survey describes consumer perceptions, while federal wage and price reports measure changes in average earnings and inflation.
The September comparison between inflation and pay raises showed a 0.7% annual decline in real average hourly earnings. The preliminary October survey separately recorded consumer sentiment at 46.3, providing a measure of household perceptions alongside the federal earnings data.
Frequently Asked Questions
Why did inflation and pay raises leave workers with less purchasing power?
Inflation and pay raises increased at different rates during the year through September 2026. Consumer prices rose 3.7%, compared with 3.0% growth in nominal average hourly earnings, resulting in a 0.7% decline in inflation-adjusted hourly earnings.
How much did real hourly earnings fall in September 2026?
Real average hourly earnings declined 0.5% from August to September 2026, according to the Bureau of Labor Statistics. The annual decrease reached 0.7% compared with September 2025.
Which expenses contributed most to September’s inflation increase?
Gasoline prices rose 9.1% during September, accounting for more than half of the monthly increase in the Consumer Price Index. Shelter prices also increased, while grocery prices declined slightly during the month.
Did longer working hours offset the decline in purchasing power?
Average weekly working hours increased 0.6% over the year through September 2026. However, real average weekly earnings still declined 0.1% over the same period.
What did the October 2026 consumer sentiment report show?
The University of Michigan’s preliminary October consumer sentiment index fell to 46.3 from 48.1 in September. Expectations for inflation over the following year increased to 4.7% from 4.6%.
