- by New Deal democrat
Once again there is a hiatus in the data for a couple of days. So let’s take a look at two of my favorite labor indicators: real average hourly wages and real aggregate payrolls for nonsupervisory workers.
First, here are real average hourly earnings for nonsupervisory workers:
These were unchanged in June. Nominally wages increased 0.3% in June, but so did consumer inflation, so the net was zero. The upward trend in these since July 2022 (when gas prices backed off from $5/gallon due to the Ukraine war) remains intact.
Here is the long term YoY% look:
Real hourly wages have increased. 1.2% in the 12 months. With a few exceptions, for the past two years they have increased between 1.0% and 1.7% YoY. More importantly, with the exception of the 2001 and COVID recessions, real hourly wages have always been negative YoY by the onset of the downturn. Typically this has been because of an inflationary pulse in the economy, which the Fed then combatted with higher interest rates.
Needless to say, real average hourly wages are not telegraphing trouble at present.
Real aggregate nonsupervisory payrolls are an even better labor indicator for the economy. Here is the long term pre-pandemic look, both in absolute terms (blue, right scale) and in YoY% change terms (red, left scale):
With the exception of the pandemic, real aggregate nonsupervisory payrolls have always peaked at least several months before the onset of a recession, and their YoY% growth has declined sharply, and crossed the zero line to negative close to coincident with the onset of recessions. It is a virtually perfect indicator, with no false positives or negatives outside of COVID and, arguably, the 2002 near-double-dip.
Here is the same graph for roughly the past three years:
Nominally aggregate payrolls declined -0.2% in June (one of the three lowest nominal readings since the onset of the pandemic), which together with consumer inflation, produced a -0.5% decline in the real number (one of the five lowest in the same period).
Despite the monthly decline, this also does not break the rising post-pandemic trend. And note, for example, as similar rough patch in early 2022. If there are further declines in the next several months, and we set a 6 month low, that would be worthy of a yellow caution flag. but we’re not there now.
