The latest consumer price index report out Tuesday shows that prices climbed at an annual rate of 3.2% in February. That’s a slight uptick from an annual rate of 3.1% in January.

Meanwhile, average hourly earnings have been rising faster, meaning that the typical worker’s wages are now outpacing inflation. After prices soared in 2022, the purchasing power of wages started to catch up last year. 

“We’ve seen an improvement in consumers’ finances really over the last six months, when real wage growth turned positive,” said economist John Leer at polling firm Morning Consult.

This benefited high earners first, he said. “They were not as much in debt as some of the middle- and low-income folks.”

It’s been harder for those households to afford higher food, rent and gas prices without getting into debt. Even with wages rising, they’ve been playing catch-up. 

“And that’s largely because they are paying elevated interest rates,” said Leer. “Once you go down the wrong end of the credit cycle, it’s tough to work your way out.”

Meanwhile, on average, Americans are working fewer hours than they were last year and in 2019, according to Liv Wang at labor market think tank ADP Research Institute.

“We see higher wage growth since the recovery. But if people are working less, their total earnings are still less than inflation,” she said.

ADP finds weekly work hours are down for women and for the highest earners, but lower-income workers and men are still putting in at least as many hours as before the pandemic.