- by New Deal democrat
Let’s take a look at the “real” purchasing power of average working and middle class Americans.
The July jobs report showed that average hourly earnings for nonsupervisory workers rose a little under 0.3% (blue in the graph below). Consumer inflation (red) rose 0.2%, so “real” average hourly earnings rose 0.1%. The below graph is the monthly changes in each over the last 24 months, showing that nominal monthly wage gains have slowly decelerated from over 0.3% to about 0.25%, while inflation, with the exception of a few months, was somnolent during 2024 and the first few months of 2025:
The net result is that real average hourly wages for nonsupervisory employees have risen on trend through last month:
Here is the nominal YoY% change in each, showing the slow deceleration of nominal wage gains, along with - until recently - the similar slow deceleration in consumer inflation, driven mainly by slowing real and fictitious rent appreciation:
The danger going forward, obviously, is if tariff-driven inflation picks up, while wage gains continue to decelerate.
For the economy as a whole, the more important metric is real aggregate nonsupervisory payrolls. Last month these jumped by 0.6% nominally, translating into a 0.3% growth in real terms. Thus in absolute terms (blue, right scale) real aggregate nonsupervisory payrolls set a new record, although the pace of improvement has slowed to only a 0.3% gain in the past four months. On a YoY% basis (red, left scale) they are up 2.2%:
To repeat, with almost 100% reliability, a peak in real aggregate nonsupervisory payrolls has preceded recessions in the past 50+ years by a few months. This suggests that no recession is likely in the next few months, although there is the same danger of slowing aggregate payroll growth and accelerating tariff-driven inflation.
Finally, let me update a metric I haven’t noted in awhile, but which showed up as the source for the Oval Office press conference last week in which T—-p touted his “real” economy: namely, the monthly real median household income compilation by Motio Research.
This group picked up the torch after Sentier Research discontinued the series. In the graph below, I show the data from 2017 to the present:
T—-p used the series to show how real median household income had increased strongly during his first term (true, until Covid) and stagnated during Biden’s term (true for the first two years, but it rose 2% during the last two years).
He also showed a graph beginning in January or February of this year, also showing a big increase. This was very misleading. Through May, real median household income hadn’t grown at all this year, and was actually *down* -0.1% since last September. The entirety of the increase came in June, when real median income increased 0.3% in one month (Motio hasn’t updated July yet).
Since the June increase could be one noisy month, the overall trend for the past 9 months has been stagnation in real median household income. Yet another reason to be very concerned if tariffs hit consumer finances harder.
