WASHINGTON, July 5 — The figure that matters for millions of American households: real average hourly earnings, adjusted for inflation, grew by just 1.1% in 2025. The bottom line: persistent inflation and high interest rates continue to squeeze household budgets, even as wage gains have recently begun to outpace price increases in 2026. By the numbers, the cost of essentials has climbed sharply since 2020.
Grocery prices are up 21% over that five-year stretch, while rent has risen 18%. Higher mortgage rates have priced many first-time homebuyers out of the market.
Homeownership rates for those under 35 fell to 37% in 2026. Credit card debt hit a record $1.2 trillion in 2025, with average interest rates exceeding 22%. That debt burden weighs heaviest on lower-income households, which spend a larger share of their income on necessities like food, housing, and transportation.
There are some bright spots. Unemployment remains low at 3.8%, providing job security for most workers.
Wage growth in sectors like healthcare and hospitality has been strong. And real earnings have improved slightly in 2026 as wage gains outpace inflation. Investors will note that the Federal Reserve is expected to begin cutting interest rates later this year.
Those rate cuts, anticipated in late 2026, could provide some relief by lowering borrowing costs for mortgages, credit cards, and business loans. The picture is uneven. For households that have managed to lock in lower mortgage rates or secure jobs in high-wage-growth sectors, the economy is manageable.
For renters facing 18% higher rents since 2020 and first-time buyers shut out by elevated mortgage rates, the strain is real. The data underscores a two-track recovery.
Low unemployment and strong wage growth in certain industries are positives. But record credit card debt and the disproportionate burden on lower-income families are warning signs that policymakers and investors will watch closely in the months ahead.
