From the BLS:

Real average weekly earnings fell by 0.8 percent from June to July after seasonal adjustment, according to preliminary data released today by the Bureau of Labor Statistics of the U.S. Department of Labor. A 0.3 percent increase in average hourly earnings was more than offset by a 0.3 percent decrease in average weekly hours and a 0.9 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). 

Data on average weekly earnings are collected from the payroll reports of private nonfarm establishments. Earnings of both full-time and part-time workers holding production or nonsupervisory jobs are included. Real average weekly earnings are calculated by adjusting earnings in current dollars for changes in the CPI-W.

Average weekly earnings rose by 2.8 percent, seasonally adjusted, from July 2007 to July 2008. After deflation by the CPI-W, average weekly earnings decreased by 3.1 percent. Before adjustment for seasonal change and inflation, average weekly earnings were $606.26 in July 2008, compared with $596.45 a year earlier.

The short summary is, real earnings are collapsing. There is no wage/price spiral, this is just people’s consumption being whacked by higher prices. This is a big problem, both economically and politically. As real consumption decreases, capacity utilization and employment will drop, further accelerating real wage declines (probably to the point of nominal wage declines, a.k.a. deflation).