The CPI Release and Real Wages

James Hamilton begins and ends a good discussion of the latest news on consumer prices with:

Does today’s CPI release indicate that inflation has returned? … Pick your poison, inflation or recession. Personally I’m more scared of the second.

I want to return to a debate between Dick Cheney and John Kerry last summer as to whether real wages were rising or declining. Average hourly earnings of production or nonsupervisory workers in real terms (1982$) were hovering around $8.30 at the end of 2003. By June 2003 – the month that the Washington Post accused Senator Kerry of lying – real wages had fallen to $8.20. A year later, they were still $8.20. The reported figure for September 2005 was $8.05.