Pay Rose 0.1 Percent in September. Prices Rose 0.6. Gasoline Did Over Half the Damage.

Average hourly earnings rose 0.1 percent in September. Consumer prices rose 0.6 percent. The Bureau of Labor Statistics published both figures on Wednesday and put the difference at a 0.5 percent drop in real hourly earnings in a single month, leaving them 0.7 percent below where they stood a year earlier.

The gap between 3.7 and 2.6

Annual inflation reached 3.7 percent in September. Without food and energy it was 2.6 percent, up from 2.4 percent in August, CBS News reported. The 1.1 point difference comes from energy. BLS puts the 12-month rise in energy at 20.4 percent and in gasoline at 34.2 percent. AAA measured the national average at $4.33 a gallon on Wednesday, against $2.98 before the war in Iran began.

The pay raise, on average, covered about a sixth of the price increase.

The rest of the basket was quiet. Food was unchanged in September, and food at home fell 0.1 percent. Shelter rose 0.4 percent and is up 3.2 percent over the year. For production and nonsupervisory workers, the squeeze was slightly tighter: the price index tracking their spending (CPI-W) rose 0.7 percent while their hourly pay rose 0.2 percent, and their real hourly earnings are down 0.6 percent over 12 months.

Hours are holding the paycheck together

Weekly pay looks better than hourly pay, and the release says why. Real average weekly earnings are down only 0.1 percent over 12 months, against 0.7 percent for hourly earnings, because the average workweek lengthened 0.6 percent. The weekly figure holds up mostly because hours rose, not because pay per hour kept pace. The data does not say why hours rose, and a longer week is not the same as a raise.

“We are more likely than not to need additional adjustments”

Calm core, or a slow build

Daly spoke to Reuters on Wednesday after the report. She read gasoline as the driver of headline inflation and underlying inflation as sticky but not sharply higher. She also said she felt no urgency to decide on limited information at the October 27-28 meeting. This account comes from Reuters' reporting of the interview; Trestlewire has not seen a transcript.

The core numbers support part of that and complicate the rest. BLS shows core prices rose 0.3 percent in September, as they did in August. Compounded over 12 months, 0.3 percent a month works out to about 3.7 percent, well above the 2.6 percent annual reading. Two rounded monthly readings are a thin base for a trend, so treat that as a pace to watch, not a forecast. But the 2.6 percent figure is a look backward, and the recent months are running faster than it.

Two readings of one report

Stephen Brown, chief North American economist at Capital Economics, said the report could prompt the Fed to pull the trigger on another hike this month. CBS News reported that market odds of an October increase moved to 50 percent from 20 percent before the data. Those odds are a market estimate, not a decision.

The Fed raised its target range by a quarter point to 3-3/4 to 4 percent on September 16, by a 12 to 0 vote, its first hike since 2023 according to CBS. The statement said inflation "remains elevated." The committee meets again October 27-28 and December 8-9.

A rate hike works on demand. It does not lower the price of crude. Who wins: savers whose accounts reprice upward. Who loses: borrowers on variable rates, and drivers, who get no relief at the pump either way. Households are already earning less in real terms than a year ago.

If gasoline keeps climbing, waiting gets harder to defend. If it levels off, Daly's patience costs less. The Fed has two meetings left this year to find out which.