U.S. Treasury Secretary Scott Bessent said lower-paid American workers are recording stronger wage growth as core inflation eases, arguing that recent economic gains have become more evenly distributed across incomes.
Bessent Points to 5.5% Wage Growth for Lower Earners
Bessent said wages for workers in the bottom 25% of the income distribution increased 5.5% over the past year. By comparison, wages for workers in the highest quartile rose about 1.5% during the same period.
The Treasury secretary used the figures to argue that the economic pattern often described as a “K-shaped economy” has changed. That term describes conditions where higher-income households advance while lower-income groups face weaker financial conditions.
Scott Bessent instead described the current environment as a “C economy,” referring to broader wage growth that favors lower-paid workers. His assessment focuses on income growth rather than differences in household wealth or asset ownership.
Average hourly earnings across the wider U.S. economy have also continued to rise. Wage growth for lower earners has exceeded recent inflation readings, allowing their pay to increase in real terms.
US Core CPI Falls to 2.5%
U.S. inflation data provided another part of Bessent’s economic argument. The Consumer Price Index increased 3.4% year over year in July, while prices rose 0.1% from the previous month.
Core CPI, which excludes food and energy, eased to 2.5% annually and increased 0.2% month over month. Both readings matched market forecasts. The annual core rate moved closer to the Federal Reserve’s 2% inflation target.
Comparing the 5.5% wage increase with the 2.5% core CPI rate gives lower-paid workers a positive real wage gap. However, headline inflation remains higher because food and energy prices remain part of the broader CPI measure.
Those expenses can account for a larger portion of lower-income household budgets. As a result, core CPI alone does not measure the full change in living costs faced by those households.
Fed Officials Remain Focused on Inflation
Scott Bessent has linked improving wage conditions and lower core inflation to his case for Federal Reserve interest rate cuts. He has described the current environment as capable of supporting economic growth without a renewed acceleration in inflation.
Some Federal Reserve officials continue to express concern about price pressures. Cleveland Fed President Beth Hammack said monetary policy should maintain restraint and argued that inflation remains above the central bank’s target.
“We need to make sure that we’ve got some amount of restraint coming from policy so that we can get inflation from this above-3% number back down to that 2% objective,” Hammack said.
The difference between headline inflation at 3.4% and core CPI at 2.5% remains relevant to the rate debate. Fed officials will continue assessing inflation, wages and economic activity when considering future changes to interest rates.
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