- by New Deal democrat
Now that we have April’s consumer inflation data, let’s update real wages for average American families.
In April average hourly wages for nonsupervisory employees increased 0.3%, and aggregate payrolls for nonsupervisory employees increased 0.4%. Since CPI increased 0.2%, in real terms wages (light blue) increased 0.1% and aggregate payrolls (dark blue) increased 0.2%:
In the case of payrolls, this was a new all-time high. In the case of wages, it was an all-time high excluding April and May 2020, which were distorted by layoffs that concentrated on low wage service workers.
Here are the same metrics as YoY% changes:
Real hourly wages are up 1.7%, while real aggregate payrolls are up over 3%.
The bottom line is that in April ordinary American consumers had more to spend in real terms, which is good for confidence and also means they had more of an ability to front-run tariff impacts by purchasing goods in advance.
In preparing this post, I wondered how much it was a feature of earlier recessions that low wage employees bore te brunt of layoffs. So the below two graphs compare real average hourly wages (light blue) and real aggregate nonsupervisory payrolls (dark blue) since the 1960s.
Looking in reverse chronological order, we see that low wage workers appear to have borne the brunt of recession layoffs in both the 2001 and 2008 recessions as well:
But in the 1970s through 1991, both aggregate real payrolls and average real hourly wages moved more or less in tandem:
Note by the way that over time aggregate payrolls increase more than wages, because of populations and labor force increases. In other words, if real wages are unchanged, but more people are earning those wages, then the aggregate goes up while the average does not. And when we are talking about whether the economy as a whole is improving or contracting, the aggregate amount is more important.
In any event, the above suggests that those earlier recessions hit the spectrum of wage earners more equally; but it is also possible that it is not a coincidence that this earlier period is when women entered the workforce in huge numbers, so that recessions exacerbated the securlar downtrend in real wages that lasted until women were fully absorbed into the labor force by around 1995.
In any event, the news for April suggests that American consumers are not ready to roll over into a cautious recessionary ball.