If you've felt your paycheck isn't going quite as far in recent months, you're not imagining it. Wages are not keeping up with inflation and there's a very real possibility this squeeze could persist.

Americans have experienced five straight months of zero or negative wage growth so far this year when adjusted for the impact of high inflation-and likely weathered another downturn last month.

The latest employment data released Friday show average hourly earnings for all employees rose only 0.1% month over month in September, translating to a 3% annual gain. That was notably lower than economists expected and a deceleration from August's 3.1% annual pace.

When factoring in the effects of inflation, real wages look set to continue their downward trend. The Bureau of Labor Statistics will release the official estimate of September real wage growth with the consumer price index on Oct. 14. But the Cleveland Fed's Inflation Nowcast projects inflation will rise 3.6% year over year for September, indicating real wage growth will be negative.

The deceleration in wage growth should give comfort to Federal Reserve policymakers the economy isn't overheating in a way that calls for a hurried rate increase cycle, writes Michael Feroli, chief economist at J.P. Morgan. That is especially good news for persistently elevated services inflation, which can be driven up by higher wage growth.

But the lack of pay gains are a tough pill to swallow for many Americans, especially lower- and middle-income households struggling with higher energy and living costs.

Moreover, the current muted wage growth trends are likely a reflection of low worker bargaining power and will likely persist until there is more churn in the labor market, says Robert Sockin, PGIM's chief U.S. economist. Given the lack of growth in job openings and muted hiring appetite among businesses, that may be a while.

Five months of negative real wage growth is exceptional. The last time the U.S. had such a span was in 2023, when real wage growth was negative for 17 consecutive months going back to 2021.

But the labor market was very different then, with the economy in recovery mode from the Covid-19 pandemic and adding an average of 399,000 nonfarm payroll jobs per month. Additionally, household incomes were being supported by federal stimulus funds, which helped offset higher CPI inflation that peaked at nearly 9% in June 2022.

"We do not have the excess job openings we did back then and the pain is already real for too many," says Diane Swonk, chief economist at KPMG.

In fact, with gas prices solidly above $4 per gallon nationwide for much of the year, Swonk adds the persistence of consumer spending in the face of such declining real pay growth has been stunning.

Americans did get a break earlier in the year, with tax refunds 11% higher than the prior year, on average. In July, real incomes also got an extra bump from a cut in taxes at the state level. That helped buoy spending, along with wealth effects from strong stock gains.

"Whether this can persist among the most affluent households is being tested by the bond market rout, which started prior to the Fed's renewed battle against inflation," Swonk says.

Low- and middle-income earners, however, are already feeling the squeeze.

"We are entering this tightening cycle with demand holding up among those who can afford it most, with little to no cushion among those who cannot," Swonk adds.

In fact, September's 0.1% monthly gain in hourly wage growth is below the pace needed to sustain real consumer spending, writes Chris Osmond, chief investment officer for Fifth Third Wealth Advisors.

"With inflation still elevated and running hotter than wage growth, real wages are negative on a monthly basis; this undermines the income-driven consumption story that has kept gross domestic product resilient," Osmond notes.

Generally, consumer spending accounts for about a little less than 70% of real GDP growth in the U.S. Still, the New York Fed Staff Nowcast for GDP growth in the third quarter and fourth quarters is 2.5%, slightly stronger than the second quarter's upwardly revised 2.2%.

One data point to watch to help determine whether American resilience is holding up will be the August consumer credit data set to be released next week, writes Mike Reid, head of U.S. economics at RBC Capital Markets.

He anticipates it could paint a concerning picture, forecasting outstanding consumer credit will rise by $12.8 billion, driven in large part by higher credit card usage.

The amount of outstanding revolving consumer credit has increased by nearly 5% since April 2025, after President Donald Trump's so-called Liberation Day, Reid calculated.

Consumers have tapped into credit to maintain spending amid slowing wage growth and reduced the amount of their take-home pay going into savings. Although the Bureau of Economic Analysis revised up the personal savings rate to 4.1% for August, it's still the lowest level in four years.

"Spending is holding up because, at the end of the day, most everyone who wants a job can find one. And when consumers have income, they spend it," Reid says.

But with inflation increasingly eating away at meager pay gains, the risks to spending-and the wider economy-are mounting.