Everyday Economics: A stable labor market is not enough

The May jobs report offered a measure of reassurance: the labor market is stable. Employers are still adding jobs, layoffs remain contained, and the economy is not showing the kind of “break” that typically signals an imminent downturn.That matters. A stable labor market provides the income floor that supports spending and keeps the gears of the economy turning. But stability is not a synonym for strength. For the modern consumer, the urgent question isn’t whether the paycheck is arriving – it’s how much of the grocery store that paycheck still buys.Currently, the answer is: less than it did a few months ago. As nominal wage growth cools and inflation remains stubborn, real wages are slipping. Workers are employed, but their purchasing power is eroding.The Consumption MirageThis distinction is critical because consumer spending often looks resilient even as household finances hollow out. Families don’t immediately surrender their standard of living when prices outpace raises; they absorb the hit first.They draw down pandemic-era savings, lean on credit, and “trade down” on ...