‘Real’ hourly earnings (wages) were actually negative

FACTS MATH & DATA: “People were caught surprised in my article about last month’s jobs report (nonfarm payroll) that ‘real’ hourly earnings (wages) were actually negative, but there are so many different ways that wages are tracked, so it’s a little bit confusing (smile) for a lot of people…

If you look at inflation, if you look at CPI, but not Core CPI, at Headline CPI, if you look at Headline CPI which includes oil, since the price of oil has been rising, you are looking at 2.8% inflation YOY (on a 12 month basis). Now take that 2.8% yearly inflation vs. the BLS Average Hourly Earnings running at 2.7% (from March 2017 to March 2018), that means a ‘real’ negative hourly wage print…

 This comes from the White House this year and you can real wage growth has had good growth in this cycle because inflation is low, in fact its been the best in decades.
This comes from the White House this year and you can real wage growth has had good growth in this cycle because inflation is low, in fact its been the best in decades.

This is why Core CPI is generally used, it is a more stable reading, because volatile oil and food prices are not counted. You have to be mindful of this, especially the closer we get to midterm elections (and you get opposing narratives on wage growth). For example, that’s why some of the ‘best’ wage gains came at the heart of the recession (if you used headline inflation that factored in collapsing oil prices, so in that context, wage growth looked really good.) If you look at today’s figures, on the Fed’s wage tracker, for prime-age workers (age 25 to 55), the group that matters, you are running at 3.5%, so ‘real’ wage growth for them, is over 1% of core inflation (and for some time now)…

This is why the economic expansion is so long, because these people are earning more, these people are consuming more (while a lot of groups are talking about how wages are down.) A lot of people see that chart with wages flattening down in the 1980s, that’s also why they talk about how wages are negative. However, keep in mind that the rate of inflation has been falling (since the 80s), that’s why wages are always positive. Also put into context that demographics (since the 80s) has changed, that two-thirds of take-home income is wages and one-third of take-home income is actually benefits now. Baby boomers with high earnings leaving the workforce and being replaced by younger workers with low earnings, there’s all these different variables…

So be mindful of this, the closer we get to midterms, you will either hear ‘low wage growth’; or you will hear that core wage growth for the prime age workforce has been 1 – 1.5% above inflation the entire time and as a result, real hourly wages have had their best decade in six decades.”—Logan Mohtashami

Source https://m.facebook.com/story.php?story_fbid=10155817285758250&id=783163249&refid=52&__tn__=%2As-R