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Wages vs. Inflation Since 2020 — What It Means for Markets & Options

Unusual Whales

• 3 min read
Wages vs. Inflation Since 2020 — What It Means for Markets & Options

Real Wages Lag Inflation — Here’s the Reality

According to CNBC, U.S. wage growth has struggled to keep pace with inflation since 2020, meaning many workers are earning less in real terms than before the pandemic. Even though nominal wages rose, consumer prices often rose faster — leaving real purchasing power compressed for large swaths of the workforce.

This divergence between wages and prices matters because consumer spending drives roughly two-thirds of U.S. GDP — and weaker real incomes can ripple into demand forecasts, corporate earnings, and risk asset valuation.

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How Wages Have Trended Since 2020

The CNBC piece highlights that:

  • From 2020 to 2025, nominal wages rose meaningfully as employers competed for labor in a tight market early in the pandemic recovery.
  • However, inflation spiked sharply in 2021-2022 and remained elevated through much of 2023-2024.
  • As a result, real wages (wages adjusted for inflation) in many sectors did not keep up — meaning workers on average had less purchasing power in late 2025 than in early 2020.

This disparity shows up when comparing the CPI index to average hourly earnings — a gap that matters for both spending and savings behavior.

Why This Wage–Inflation Gap Matters for Markets

Real wages dictate consumer spending power, and here’s how that feeds into markets:

1. Consumer Discretionary Demand
Lower real wages can suppress discretionary spending — from travel and dining to retail. Stocks tied to consumer demand may face dampened top-line growth forecasts.

2. Earnings Pressure on Corporates
With consumers tightening belts, companies may see slower revenue growth, leading to downward revisions in earnings estimates.

3. Credit and Delinquencies
Persistent gap between incomes and prices increases reliance on credit — something markets watch through credit spreads, auto loans, and delinquencies.

4. Policy Expectations
Sticky inflation with lagging wage growth complicates Fed policy — potentially reducing expectations for steep rate cuts and keeping yield curves elevated.

All of this feeds into risk pricing, which markets often reflect first in options volatility and skew.

Consumer & Retail Names to Watch on Unusual Whales

These stocks are sensitive to consumer demand patterns and may show in options flow when real incomes falter:

Consumer Discretionary & Retail

Weak real wage growth often precedes volatility expansion and hedging in these names as traders brace for slower consumer cycles.

Macro Leaders & Risk Barometers

When confidence in consumer income softens, macro barometers often reflect early skew tilts and put flows.

Financials & Credit Stress Proxy Names

Financial names can offer early indicators of stress when wage dynamics deteriorate and credit demand rises.

Options Flow Themes to Watch

Wage vs. inflation trends often signal risk appetite changes, and that shows up in the options market through:

1. Put/Call Skew Expansion
When data suggests weaker consumer power, puts in consumer cyclical names can gain relative influx — often before equity prices adjust significantly.

2. Volatility Term Structure Shifts
Term structure — the curve of implied volatility across expiries — can steepen when markets anticipate slower growth and higher uncertainty.

3. Defensive Hedging Activity
In environments where real income is eroding, traders often rotate capital to defensive or less sensitive sectors, visible via options flow in those tickers.

Unusual Whales flow data reveals these patterns well before they become evident in broader stock moves.

Broader Economic & Policy Implications

The wage–inflation gap also interacts with key policy elements:

  • Federal Reserve decision-making — Sticky inflation versus soft labor markets complicates rate paths. Markets may revise rate cut expectations based on real income trends.
  • Consumer Credit Trends — If incomes can’t keep up, borrowing rises — potentially widening credit spreads and tightening liquidity premiums.
  • Sentiment Impact — Consumer confidence measures often lag real income trends, but when they adjust, trading patterns shift quickly.

Markets don’t wait for confirmation — options markets price expectations ahead of macro data.

Final Thoughts

The disconnect between wages and inflation since 2020 isn’t just a household finance story — it’s a macro driver for demand trends, corporate earnings trajectories, and risk sentiment.

For traders, the edge often lies in watching how positioning, implied volatility, and skew adjust before cash markets price in slowing demand.

Call to Action

Want to track the flows and volatility signals before price follows?

Unusual Whales gives you historical and real-time options data, GEX analytics, implied volatility trends, and market tide indicators — the tools traders use to anticipate macro shifts before they show up in equity prices.

Create your free Unusual Whales account and start uncovering opportunities:
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