Friday, February 6, 2015

Nominal and real wages: the agony and the ecstasy

 - by New Deal democrat

Among all of the strong data in today's jobs report, probably the most significant on both the upside and the downside were wages.

First, the ecstasy.  Here is real, inflation-adjusted earnings for production and nonsupervisory personnel (thus taking out the top 10% or so of wage earners) for the last 10 years:

Note this only goes through December, since January inflation hasn't been reported. December set a new high, exceeding by less than $.01 the previous high in 2010.

Here's the longer term view:

Real average wages are now higher than they have been at any time since late 1979.

But here's the agony.  This is the YoY% change in nominal, (i.e., actual) wages:

Not only is there no sign whatsoever of any wage pressures, but YoY% growth in nominal wages has actually decreased.  This is an actual bad sign. With the unemployment rate under 6%, nominal wages growth should be increasing, not decreasing.  Instead, all of the real growth in wages is coming from the collapse in the price of gasoline.