Weekly Indicators for September 8 - 12 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

Will the big decrease in interest rates this year give housing a second wind?  Housing permits will assume more than their usual importance when they are reported in the coming week.

Expect another upward revision of Q2 GDP: over 4.5%?

 - by New Deal democrat

You may remember 3 months ago when Q1 GDP was revised all the way down to -2.9%, from an initial report of +0.1%, the main culprit was a sudden and unexpected decline in health care costs.  The BEA acknowledged that this came from exactly one report:  the Census Bureau's Quarterly Services Report.

I wrote a post confirming something Dean Baker (?) had written:  namely, that the same thing had occurred 50 years ago when Medicare was inaugurated.  There was a one quarter sudden and anomalous decline in GDP.  But then it was followed by a surge in the next quarter.

Well, this morning the Quarterly Services Report for the 2nd quarter was released, and it shows a similar surge in Q2 compared with Q1.  Hospital services, which unexpectedly declined -1.3% seasonally adjusted from Q4 2013 to Q1 2014, rose by +2.6% in Q2 2014.  The larger aggregate of health care services, which isn't seasonally adjusted in the report, rose +3.0% in the 2nd Quarter, after declining -2.0% in the 1st.

In comparison, the Q1 to Q2 change in 2013 for health services was about 2.2%, and added .4% to GDP.

While I am no maven of the minutiae of how GDP is calculated, nevertheless since 2nd quarter 2014 GDP as presently revised only shows a +.05% contribution by health care, it appears that at very least 2Q 2014 GDP is likely to be revised upward to 4.5% or better.

Even if so, the bad news is that the combined GDP for the first half of 2014 would still only be about +1.2%.

The Conundrumette

 -by New Deal democrat

I have a new post up at XE.com.

The unusual big divergence between stock returns (booming) vs. bond yields (falling significantly since January of this year) is trying to tell us something.  But what is it?

Why has job growth outperformed GDP growth?

 - by New Deal democrat

In mt last post, I politely took issue with Dean Baker's claim that August's mediocre jobs number was not an outlier.  Rather, I pointed out, for the last 3 /12 years we have had an unusually strong trend in job growth compared with GDP growth.

The YoY percentage of jobs added since World War Two  has been about -1.5% less than the YoY percentage growth of real GDP.  In other words, if GDP is about 2%, about half of the time there has only been  0.5% job growth or more, and about half the time there has been less than 0.5% growth.  Since the beginning of 2011, however, GDP has grown gernerally between 1.5% and 2.5% a year, but job growth has also ben about 1.5% a year -- about 1% higher than that median historical trend.

Here's the graph of YoY jobs - YoY GDP adjusted by 1.5%, so that the long term median is 0, for the last 30 years:

So why have jobs, relatively speaking, so significantly outperformed GDP?  Here's my working hypothesis.

Here is a graph you've seen a number of times before.  This is a graph of initial jobless claims as a percentage of the entire civilian labor force, plus those who are not in the labor force but want a job now:

What this adjustment does is tell us what percentage of people who hold a job, or want a job, are laid off in any particular week. In this way it takes into account demographics and in particular, the large cohort of Boomers over 55 years old who are retiring in droves.

What you can clearly see is that this ratio is extremely low.  Relatively speaking, the rate of layoffs is equal to the lowest in the last 50 years.  Another way of looking at this data is that employers are running particularly tight ships.  Compared with the entire post-WW2 era, they have pared the number of workers they need down to the absolute minimum for the current level of work.

The next graph is the percentage of all jobs that are temporary jobs:

This graph is just the opposite of the initial jobless claims graph.  It is at an all-time high.

Putting this all together, we have an employment environment where, compared with the post-WW2 era, employers have exactly enough employees to cover a regular workload with no slack whatsoever.   When the workload increases, the existing workforce is not sufficient to handle it.  New workers, with a bias towards temporary workers (who aren't entitled to medical benefits and whose contract can be terminated at any time) need to be employed.  This compares with the earlier era where new work meant that the slack in the workloads of existing employees was pared down.  The net result is that increased activity (increased GDP) leads to a need for relatively more new hires.

One way to test that is to compare hours worked with jobs created.  Once existing workers are pushed to the limit, the only way to increase output is to hire more workers.  As it happens, we can test exactly that by comparing aggregate hours worked in the economy (blue) to total jobs (red), and norming each to their prior peak in 2007:

What we see is that aggregate hours increased more than jobs until the entire shortfall was made up by about the beginning of 2012.  Since that time, both series have moved in nearly identical trends.  While it's not a perfect fit, it suggests that at least since the beginning of 2012, current employees have been fully utilized.  Increased output has required additional workers.

It seems to me this is a good explanation for the relative outperformance of job growth vs. GDP growth in the last 3 1/2 years.

Powerline Blog Issues No Response to My Request For a Comment On Their Longstanding And Incorrect Inflation Arguments

Since the Federal Reserve engaged in QE, Powerline  blog has been one of many voices arguing inflation would result.  It hasn't:

Bloomberg wrote an article about the Fed naysayers yesterday that included this calculation:

If you agreed with all the academics, billionaires and politicians who denounced Federal Reserve monetary policy since the financial crisis, you missed $1 trillion of investment returns from buying and holding U.S. Treasuries.

That’s how much the government bonds have earned for investors since the end of 2008, when the Fed dropped interest rates close to zero and embarked on the first of three rounds of debt purchases to resuscitate an economy crippled by the worst recession since the Great Depression.

The resilience of Treasuries represents a rebuke to the chorus of skeptics from Stanford University’s John Taylor to billionaire hedge fund manager Paul Singer and U.S. House Speaker John Boehner, who predicted the Fed’s unprecedented stimulus would lead to runaway inflation and spell doom for the bond market. It also suggests investors see few signs the five-year-old expansion will produce the kind of price pressures that would compel Fed Chair Janet Yellen to side with the central bank’s hawkish officials as they consider when to raise rates.

I wrote an email to Powerline Feedback yesterday:

Gentlemen,

The writers at Powerline have uniformly argued the Fed’s policy of quantitative easing would lead to massive inflationary pressure. 

However, as pointed out in a recent Bloomberg article (see link below), if someone had followed this investment thesis (which would have led them to bet against the US Treasury Market) they would have lost a large amount of money.

Do you have any intention of issuing any type of “mea culpa” regarding your incorrect analysis?

http://www.bloomberg.com/news/2014-09-08/you-missed-1-trillion-return-agreeing-with-fed-naysayers.html

F. Hale Stewart JD, LLM

 

They have yet to write anything in response.

 

 

In which I politely disagree with Dean Baker about the employment report

 - by New Deal democrat

Last Friday Dean Baker wrote that Economists who understand economics didn't see the August Jobs Report as an Outlier, saying:

Actually, the numbers match the market very well. The economy grew at a 1.1 percent annual rate in the first half of the year. Faster growth in the second half of the year might bring the rate for the whole year to 2.0 percent. If we assume that productivity growth is 1.5 percent, this would imply an increase in the demand for labor of 0.5 percent. That translates into 700,000 jobs for the year or roughly 60,000 a month.

Let me state right here that, like Bill McBride a/k/a Calculated Risk, I think it most likely that August is simply an outlier.  As Jeff Miller pointed out on Sunday, the standard error in this series runs up to 100,000 a month, and as Bill pointed out, even in the best years for job growth, there has always been at least one faceplant.

You can probably see the issue here right off the bat:  If Dean is correct that August wasn't an outlier -- that if anything it was above trend at 142,000 -- then what about the last 7 months, in which 1.4 million jobs, or over 200,000 a month were added?  Were they all outliers?  In a row?  In fact, what about the last 3 1/2 years, as I'll show below.

To begin with, if we go back 65 years, all the way to 1948, when we can track both GDP and jobs, there have been 266 quarters in total.  When we compare real annualized job growth vs. real annualized GDP growth over those 266 quarters, the median difference is about 1.5%, meaning that in about half of those quarters, real GDP growth exceeded job growth by 1.5%, and in the other half real GDP growth was less than 1.5% higher than job growth.   Here's the graph - you'll just have to trust me on the count, unless you want to do it yourself!:

Here's a closer-in look at the last 30 years:

Two things to notice are (1) there is a lot of variability around that 1.5% median, and (2) since the beginning of 2011,   job growth has been well above trend in about 2/3 of the quarters, sometimes by over 2.5%.

Here's a slightly different way to look at the same thing.  This is the YoY% of real GDP growth (red) compared with the YoY% of job growth (blue):

You can see that job growth has typically been only about 0.5% to 1.0% less than real GDP growth for the last 3 1/2 years, in other words +0.5% to +1.0% higher than the long term trend that is Dean's benchmark.

So my question to Dean Baker is, respectfully, if August isn't the outlier, then what is your explanation for the job growth of ~8.2 million, or nearly 200,000 a month, for the last 3 1/2 years?

I do have a hypothesis, which I'll share in my next post.

Effects of age, the unemployment rate, and asset holdings on household income and welath

 - by New Deal democrat

Last Thursday the Federal Reserve came out with its Report on Consumer Finances for 2013.  This is the most in-depth cross-sectional look at the state of America's household balance sheets, so it is going to get a lot of play. Some of that discussion is going to be on point, and some of it will be misleading at best. So I thought in addition to giving you some value-added, that you probably won't read about elsewhere, I'd discuss a few ways the report is likely to be misinterpreted.

An important limitation: the survey badly lags

Before I begin in earnest, let me point out one important limitation of the study.  You are probably going to read a lot of analysis couched in the present progressive tense, as in, "income is declining."  That's not a true statement.  Because this survey is only conducted once every 3 years, the only comparison is between 1 year ago and 4 years ago.  The survey is unlikely to pick up a turning point that took place in 2012 (e.g., real median or average wages as measured in other reports).  For that, we'll have to wait for the 2016 report which will be published in 2017!  So you can see that this survey, while thorough, is badly lagging.

The economic rift in American society has been growing

So far what I have read hits the two biggest points:

• 1. Median income and wealth both declined compared with 2010 across cross sections
• 2. the divide between haves and have-nots is increasing.  Somewhere between the 50th and 75th percentile of income, a rift is developing. Balance sheets are improving roughly for the top 1/3 of Americans, and the higher the income percentile from there, the greater is the improvement. For roughly the bottom 2/3 of Americans, their incomes and wealth are declining.

For example, Digby highlighted the graph showing that the share of overall wealth owned by the top 3% grew. That for the next 7% is flat, and that for the bottom 90% shrank.

That wouldn't necessarily be so bad.  For example I'd rather own 9% of a $120 pie than 10% of a $100 pie.  The bigger problem is that, as shown in the graph below (2010 is left column, 2013 on right):

the bottom 90% has seen an outright decline in absolute wealth.

The millionaire next door is likely to also be known as "mom and dad"

As the above graph shows, the household at the 82.5th percentile is worth about $500,000.  the 95th percentile is worth just shy of $2 million. A reasonable guess is that 10% of all American households are worth $1 million.

Now let's see how wealth skews over age groups:

As I've said before, a 25 year old worth $250,000 is for all intents and purposes, rich.  A 65 year old worth $250,000 years old is no better than working class.

While the survey doesn't tell us what percent of millionaires are Boomers, the likelihood is that they are the lion's share.

While declining median wealth is widespread, demographics probably plays the biggest part

Next up, here is the graph of median incomes by age group:

Note that median income starts to drop off at age 55, and especially after the normal retirement age of approximately 65.

Since the number of people in the 25 to 54 age group has stagnated over the last 20 years, while the population over age 55 has surged in the same time period, as shown in this graph:

real median household income has declined as a simple matter of demographics.

It is interesting, and distressing, that median incomes have declined for declined drastically for those ages over 45-54 in particular.  I'd like to blame this all on the unemployment rate, but with the comparison period of 2010 (the peak in the unemployment rate was in 2009), it looks like there has been real hardship in this group in particular.  So demographics is not the only thing at work.  Still having a huge demographic retired into a lower income distribution has to be skewing the overall median figure more than anything else.

For wealth, asset classes made a huge difference

Although not a surprise, the report confirmed that, the more you relied on savings and on bonds, the more you suffered in the last few years.  Contrarily, if your main source of wealth was stocks, Happy Days are Here Again:

This is a graph of wealth, so it isn't just that CD's and bonds basically are paying nothing, it appears that people en masse pulled off of those asset groups.  It is likely that hose who could, rotated into stock mutual funds and ETF's.  Needless to say, the working class normally has its wealth ties up in housing (which lost value) and savings, whereas the wealthy have always had a far bigger share of wealth in investments like stocks. This only exacerbated the divergence in wealth.

The Federal Reserve report is further confirmation,  as Business Insider put it on Friday, that Piketty was right, as was the Occupy Wall Street movement. Until Washington is forced to respond more to the people than the plutocrats, we can expect the long-term trend to continue.

Weekly Indicators for September 1 - 5 at XE.com

 - by New Deal democrat

This week's post is up at XE.com.

Every now and then the nonfarm payrolls number just throws a spanner into the machine.  The weekly indicators don't suggest any slowdown has started at all.

A brief note about the Fed report on household wealth and income

 - by New Deal democrat

Yesterday the Fed released its report on 2013 household wealth and income.  The report only comes out once every three years, so the comparison is with 2010.

So far what I have read pretty accurately summarizes the report. But I want to add a few comments about items you probably won't read elsewhere, and some cautions about interpreting it.  I hope to have that up later today.

August jobs report: Jobs hit a speed bump

- by New Deal democrat

HEADLINES:

• 142,000 jobs added to the economy
• U3 unemployment rate declined from 6.2% to 6.1%

Wages and participation rates

• Not in Labor Force, but Want a Job Now: up 45,000 to 6.304 million
• Employment/population ratio ages 25-54: up 0.2% from 76.6% to 76.8% (NEW POST-RECESSION HIGH)
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 (or +.3%) from $20.62 to $20.68, up 2.4% YoY

June was revised downward by -31,000 to 267,000. July was revised upward by 3,000 to 212,000.  The net revision was thus -28,000. 

Since the economic expansion is well established, in recent months my focus has shifted to wages and the chronic heightened unemployment.  The headline numbers for August show a little progress on wages, and mixed results on participation.

Those who want a job now, but weren't even counted in the workforce were 4.3 million at the height of the tech boom, and were at 7.0 million a couple of years ago.  They have actually risen for the first eight months of this year. As noted above they were 6.3 million in August.  This is almost certainly due to the cutoff in extended unemployment benefits by Congress at the end of last year.

On the other hand, the participation rate in the prime working age group has made up 40% of its loss from its pre-recession high.

After inflation, real hourly wages for nonsupervisory employees probably increased from July to August. The YoY change in average hourly earnings is +2.4%, somewhat better than the inflation rate.

Finally, while the unemployment rate fell, it was because 64,000 people left the work force.  This only partially reverses last month's good number, with the net change in the civilian labor force over the last two months rose by 265,000, while the number of new jobs in the same two month period rose by 148,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed but with a positive bias.

• the average manufacturing workweek rose by +0.1 hours from 40.9 to 41.1.  This is one of the 10 components of the LEI, and will have a positive impact.


• construction jobs creased by 20,000. YoY construction jobs are up over 200,000, or about 4%.  This is good news.


• manufacturing jobs  were unchanged, and are up 168,000 YoY.


• temporary jobs - a leading indicator for jobs overall - increased by 13,000.


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 22,000 to 2,609,000 compared with December's 2,255,000 low.

Other important coincident indicators help us paint a more complete picture of the present:

• The average workweek for all nonsupervisory workers was unchanged at 33.0 hours.


• Overtime hours was also unchanged at 3.4 hours.


• the index of aggregate hours worked in the economy grew by 0.1% from 108.7 to 108.8. 


• The broad U-6 unemployment rate, that includes discouraged workers decreased from 12.2% to 12.0%.


• Part time jobs for economic reasons decreased by -234,000.

Other news included:

• the alternate jobs number contained in the more volatile household survey increased by only 16,000 jobs.  The household survey jobs numbers had been lagging the establishment survey numbers, but as expected this difference has now been almost entirely made up, with the household survey showing a 2,189,000 increase in jobs YoY vs. 2,482,000 in the establishment survey. 


• Government jobs increased by 8,000.

• the overall employment to population ratio for all ages 16 and above was unchanged at 59.0% , and has risen by +0.4% YoY. The labor force participation rate fell from 62.9% to 62.8%, and has fallen by -0.4% YoY (but remember, this includes droves of retiring Boomers).

Relatively speaking, this was a poor report in comparison with the last 6 months.  But I wouldn't treat it as anything more than a speed bump. Most of the leading parts of the report were positive.  IN other words, this doesn't seem to herald a change in trend.

We did get a good number on wage growth, and we did get a good number on the prime age participation rate.  On the other hand, those who have dropped out of the labor force but would like to be employed remains signficiantly higher than it was at the end of last year.

No, Meteor Blades, household income does NOT measure the earnings of everyone in the household

 - by New Deal democrat

Real median income measures the INCOME of everyone in the household.

For example, if an 80 year old gets a pension payment, or interest payments on savings or bonds, that is included, even though it is not earnings. Since there are a lot more people over 55, and particularly over 65 now, as a percentage of the population, and they have lower income than prime working age households, real median household income has been in a secular decline.

That's why real median household income has mainly been telling us since 2000 that Boomers are leaving the work force,and now they are retiring in droves. Secondarily, it is a proxy for the employment to population ratio, as increased unemployment means lower income.

This may be the month unemployment finally falls below 6%

 - by New Deal democrat

I have a new post up at XE.com.

As you probably remember from past posts of mine, the ratio of initial jobless claims to the population is a pretty decent short leading indicator for the direction of the unemployment rate.

With July and August initial jobless claims in the vicinity of 300,000 and even less, we should finally cross to below the 6% threshold - i.e., a more "normal" unemployment rate - in the next several months.  Maybe even this Friday.

Weekly Indicators for August 25 - 29 at XE.com

 - by New Deal democrat

My Weekly Indicators post is up at XE.com.

This was one of the most universally positive weeks I have ever seen. Only one series was negative and one neutral. Everything else was positive, several strongly so.

International Week In Review: Concerns Mounting For the EU and Japan

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/international-week-review-concern-mounting-about-eu-and-japan-edition

Problems Mount For the EU

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/problems-mount-eu

Comprehensive housing summary for July 2014: prices peak, but lower interest rates are putting an end to the sale slowdown

Wtih yesterday's report on pending home sales, housing data from the first 7 months of 2014 is in the books.  The data clearly shows that earlier this year was the trough of the housing slowdown, and that lower mortgage rates - down over .5% from the beginning of this year - are beginning to have a positive impact. At the same time, it appears that housing prices hit an interim peak earlier this summer, and are stabilizing if not in a slight decline.

I've seen some very poor analysis of the housing market, that I won't link to, in the last month.  For example, I've seen an argument, unsupported by actual data, that prices or even inventory, rather than interest rates, lead sales. This is demonstrably false if you simply look at the data.

You really need to remember the following.  The housing market tends to cycle in a regular order:

• 1st, interest rates turn
• 2nd, permits, starts, and sales turn
• 3rd, prices turn
• 4th, inventory turns

Because of the time lag, prices and inventory may still be reacting to a move in interest rates that has since reversed - and that appears to be the case now.  July is when the turn in rates and prices became clear.

Interest rates

First, here is a graph, covering the last 30 years, of the YoY% mortgage rates (inverted so that higher rates give a lower value, blue) vs. housing permits, YoY change in 100,000's (red):

Here's a close-up of the last 5 years through July:

Interest rates on mortgages went up from 3.4% in early May 2013 to a high of 3.6% in August of last year.  On 16 of 19 occasions since the end of World War 2, that big a change led to a YoY decline of at least -100,000 in permits. In this case, housing permits drifted back lower, down to 4.1% at the end of June of this year, and in the last month have been on average about -0.3% lower than they were at this time last year.

The YoY decline in interest rates suggested that we would start to see some improvement in permits, sales, and starts, although probably muted since rates have not returned to 2013 lows.  In July, in two of the three series, we did.

Permits, starts, and sales

Here is a graph of the change, in thousands, YoY of starts (blue), permits (red), new home sales (green), and existing home sales (orange) (note that the St. Louis FRED does not track pending home sales):

Next, here is the YoY% change in the same four statistics:

Both of these graphs show the clear deceleration in the housing market through 2013 and into outright  declines in the early part of this year.  New and existing home sales have been consistently negative YoY, and permits ended up at midyear only +2% in the first half of 2014 compared with the first half of 2013.

But with July's data, we can see that the trough of the housing slowdown is in place, and that there has been a significant positive turn in the last several months.  Only pending sales were negative YoY by -2.1%, although they were up month over month for the fifth month in a row.

In summary, through July 2014:

• Permits are down -0.9% from their October 2013 high, but up +12.6% from their January 2014 low
• Starts are down -1.1% from their November 2013 high, but up +21.9% from their Januay 2014 low
• New home sales are down -9.8% from their January 2013 high, but up +2.2% from their March 2014 low
• Existing home sales are down -4.3% from their July 2013 high, but up +12.2% from their March 2014 low
• Pending home sales are down -2.1% from their June 2013 high, but up +12.4% from their February 2014 low

The impact of demographics on permits, starts, and sales

I suspect the situation this year is analogous to the late 1960's (one of the four exceptions to the rule that rising interest rates cause an actual decrease in sales), when Boomers first reached adulthood and the existing apartment stock was nowhere near adequate to the task.  Multi-unit starts skyrocketed, despite higher interest rates, while single family homes languished. It was an era of generally rising interest rates, and any temporary decline in interest rates was met with heightened housing activity.

Now it is Millennials. Now as then, it is only multi-unit (apartment) construction that is carrying the recovery in housing this year. Even with the overall July increase, single family home starts and sales have completely stalled.  Here is a graph of the YoY% change in single family house permits (blue) and multi-unit permits (red) since the beginning of 2011:

Since late 2013, multiunit construction has been entirely responsible for any increase in residential construction.

Prices

 The Case Shiller 20 city index for July showed an actual decline from May and June.  By this important measure, prices have actually already made an interim peak:

Median prices for new homes (red) and existing homes (blue) are not seasonally adjusted, so I am showing their YoY% change, which shows continued marked deceleration in price gains.  Note that YoY comparisons lag seasonally adjusted month over month comparisons:

It is likely that we have seen an interim, seasonally adjusted price peak in housing.  It should decline for awhile before bottoming, as sales have already bottomed.

Inventory

With housing prices still increasing YoY, even if they are near or at or slightly past their seasonally adjusted peak, we would expect to find more inventory entering the market, as potential sellers hope to take advantage of the improved pricing situation.  And that's exactly what we find. Below is the graph of combined new and existing home inventories:

The inventory of houses for sale is not just increasing, but it is increasing at an accelerating rate YoY.


In summary, through July 2014:

• 1. Lower interest rates have revived sales from their trough earlier this year. At the same time, because interest rates are still higher than they were several years ago, I am not expecting a renewed boom in sales.
• 2. As shown by the Case Shiller Index, prices hit an interim peak earlier this summer.  Because the lower interest rates are already feeding through the system, at this point I am expecting only a slight decline, or more generally a period of stable prices.

As I have noted a number of times in the last month, the biggest issue in the second half of this year is how much interest rates go down, and whether the decline is transitory or persists.  New housing sales are very important to the economy, and tend to feed through the entire economy over the course of a year or more.  For now, the trend is in the right direction.

2Q deflated corporate profits, real residential spending add to caution about 2015

- by New Deal democrat

I have a new post up at XE.com, discussing several important datapoints from this monring's revisions to second quarter GDP.

The remainder of 2014 still looks good, but there is at least one additional reason to remain cautious about 2015.

No matter how you measure, wages have stagnated

- by New Deal democrat

We have a variety of economic data series to track wages, including measures of average wages, median wages, and wages per unit production hour. There are at least 7 such measures.

In addition to the monthly average hourly pay report (listed first below), there are 4 quartely series:

• The most  commonly known measure is that of average hourly pay for nonsupervisory workers, which is part of the monthly jobs report.
• The Bureau of Labor Statistics, which conducts the household employment survey, also reports "usual weekly earnings" for full time workers each quarter. 
• The BLS also measures the Employment Cost Index quarterly.  
• The BLS also measures "business sector real compensation per hour" quarterly. 
• Another quarterly measure is unit labor costs, which measure how much labor gets paid per unit of output.

There are also two annual series:

• The BLS reports occupational employment statistics which are reported annually.  
• Additionally, the Social Security Administration measures annual net compensation from actual W-9 tax withholding forms, but this has only been issued through 2012.  This method means that the result is subject to change based on the total hours worked (remember that in the recession we lost 6% of jobs, but almost 10% of aggregate hours).  

Let's take a look at all of them.

The first graph, below, tracks monthly average (mean, not median) hourly wages (green), median wages from the employment cost index (red), and unit labor production costs (blue). All are adjusted for inflation using the CPI.  Since the quarterly index of median wages only started in Q1 2000, I have normed the indexes to 100 at that time:

As you can see, real average wages have risen fitfully, mainly reacting to the price of gas). Median real wages have essentially been flat for 10 years. This is certainly not what I would call good, given all the productivity gains during that same period. You need consumers to have the money to buy, before real growth in selling picks up as well.

Speaking of productivity gains, here are unit labor costs (i.e., how much labor does it cost to produce one widget) through the second quarter of 2014:

But since the price producers have charged for widgets has changed over time (in other words, is it really a labor gain if labor costs 2% more per widget, but the producer charges consumers 4% more per widget?), here are real unit labor costs adjusted by inflation:

This tells quite a different story.  The share of payments to labor has not kept up with the real price of production -- which is the flip side of record corporate profits.

The remaining 4 measures do not come with graphic presentations either by the BLS or the St. Louis FRED.  So I will provide them in a table, below.

Two of the remaining series uses tax return data.  Once a year, the Social Security Administration reports on the median salary of those who pay into it via their withholding taxes.  Secondly, every year the BLS reports on mean and median hourly wage rates for a panoplay of "occupational employment," and also give the average and the median for the aggregate sample. The most recent report, from this April,  reported on the data as of May 2013. The below table gives the median wage, adjusted by the CPI.

A third measure in the table below is the quarterly measure of "usual weekly earnings" of wage and salary workers. That report only goes back to 2004.

To reiterate, all of these are adjusted for inflation:

Year	Social Security		Usual weekly earnings	Occupational Employment
1999	27,164		---	---
2000	27,374		---	---
2001	27,713		---	16.78
2002	27,784		---	16.95
2003	27,657		---	16.91
2004	27,903		332	16.80
2005	27,331		333	16.71
2006	27,832		335	16.80
2007	27,984		345	16.70
2008	27,468		342	17.22
2009	27,584		337	17.12
2010	27,382		335	17.13
2011	26,963		337	16.86
2012	27,413		335	16.71
2013	---		333	16.63

 While two of the above 3 measues are annual, "usual weekly earnings" is updated quarterly, so here is a more detailed look at that measure through the second quarter of this year:

2013 Q1  332
2013 Q2  334
2013 Q3  333
2013 Q4  334
2014 Q1  336
2014 Q2  330

If you are keeping score, among the median measures, that's a decline from peak to trough is -3.6% for Social Security, -4.3% for usual weekly wages, -3.4% for Occupational employment, and -2.6% for the Employment Cost Index.  Average hourly wages declined - 2.6% from 2009 to their trough in 2012.  The big, nearly 2% decline in second quarter 2014 of usual weekly earnings is certainly surprising. Since it goes against all of the other monthly and quarterly series, I am inclined to think it is just a case of an outlier panel.  We'll see when 3rd quarter results are posted in October.

The bottom line is that, since the turn of the Millenium, real median wages - no matter how measured -  have stagnated. Gas prices caused them to rise during the recession, and then decline thereafter as the effects of those gas prices filtered through the economy. 

The jury is out on whether that decline has ended. Some measures suggest that real wages bottomed in late 2012 or early 2013.  Others suggest that the decline may have continued at least slightly since then.

No matter which measure you use, the fact is that American labor is still not sharing in the fruits of its productivity.

Draghi's Austerity Defense Rings Hollow

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/draghis-austerity-defense-rings-hollow

This Week's Germany News Has Been Concerning

This is over at XE.com

http://community.xe.com/blog/xe-market-analysis/weeks-news-germany-not-encouraging