Wednesday, February 14, 2018

This is bad: real wages *declined* in January; may be rolling over

 - by New Deal democrat

Consumer prices rose +0.5% in January. That in itself isn't bad news, as they rose an equal +0.5% one year ago, so the YoY inflation rate remains at +2.1% (so if 2% really is a target rather than a ceiling, it should not give the Fed any cause for alarm).

But that much vaunted wage hike in the January jobs report has entirely disappeared, and not just for non-managerial workers, but for the average of all workers including managers. In fact in January real wages declined.

And the trend is a little worrying.

To begin with, real wages declined -0.3% for ordinary workers, and they are now down -0.8% from their July peak:

On a YoY basis, real wages are only up +0.3%:

Even worse, they are only up +0.1% from January 2016!

Note that even when we include managers, real wages fell in January, and are -0.5% below where they were in July:

Another metric that I think is very important is aggregate real payrolls for non-managerial workers.  This tells us how much money, in real terms, the middle and working class are earning.

After rising strongly in 2014 and 2015, it decelerated in 2016 and even more in 2017:

Note that, in the aggregate, real wages declined for the middle and working class in January, and they are back at the level they were 7 months ago.

On a YoY basis, real aggregate payrolls rose 2%:

This is undoubtedly why we have seen the personal saving rate decline over the last 6 months:

Also this morning, although Fred hasn't update the graphs yet, real retail sales declined -0.8%, putting that figure at a three month low. 

All in all, this is bad news, not just for the month, but in terms of a stalling trend that may even have rolled over, both in terms of worker wages, and possibly even in terms of real retail sales per capita, a long leading indicator of recession.