Real average and aggregate wages: July 2018 update
Real average and aggregate wages: July 2018 update
By now you’ve probably read elsewhere that YoY wages for average workers actually declined slightly (-0.1%):
But the flatness goes back further: all the way to February 2016:
Real wages have only grown 0.4% in the last 2 years and 4 months.
So why is the consumer economy still growing? In part because the savings rate has declined:
Another reason for the growth, at least this year, which I’m unable to graph, is that on net there was about $4 Billion per month cut in withheld taxes, much and perhaps most of which is being spent.
Finally, let me update the graph on real aggregate wage growth, which shows that since their bottom way back in October 2009, they have risen by about 26%:
Basically, the improvement in the employment rate, plus the growth in average hours worked, is making up for the stagnation in real hourly wages.
Good work! The Trumpsters are celebrating the 2.7% increase in nominal compensation as if this were a tremendous increase in real compensation. Since when did we decide not to look at the increase in the consumer price index?
I am still looking for an answer to how, if at all, inflation is considered when reporting the rate of growth in GDP. I have absolutely no use for Trump in any arena–he is a fraud on everything–but I think he was slightly unfairly treated when folks took him to task for stating GDP had doubled or tripled under his watch. I think he was referring to the growth rate of GDP which still does not make his statement accurate unless you cherry pick the quarters compared, but certainly makes more sense. My question is whether the uptick in inflation is playing any role in the slightly more robust growth in GDP. On the topic at hand, real wages have barely budged since the late 1970’s and there are a variety of government policies to blame as well as globalization and automation. Of course, the concept of real wage growth is deceptive. If it took 15 hours of work to buy a tv set in 1980 and it still takes 15 hours of work to buy a set today, can we say there has been no real wage growth when the tv set today is a large flat screen smart tv and the one in 1980 was smaller, weighed 60 pounds and was dumb?
Terry…while I think the question is worth considering, are you using your anecdoteof the TV as a question or an answer?
Ever wring out a dish rag?
Also add the effect of increasing consumer debt.
From about Q4 2008 to about Q2 2013 Total Household Debt as reported by the New York Fed was decreasing. But since Q2 2013 Total Household Debt debt has been increasing.
Increase in Total Household Debt (From end of Q1 to end of Q1):
Year________Percent
2013-2014_____3.731
2014-2015_____1.725
2015-2016_____3.384
2016-2017_____3.861
2017-2018_____3.819
Dan, My thoughts about televisions–the basket of goods if you will was really just an observation. My real inquiry was that during the Obama administration one of the many criticisms was the historically slow rate of growth in GDP following the deep recession of 2008-2009. Perhaps significantly the Obama years were marked by very low inflation despite the Fed inflating its balance sheet in an effort to stimulate the economy after the GOP took over Congress in 2010 signalling the end of any fiscal stimulus. With Trump in office fiscal stimulus was back on the table and there are some signs that inflation is once again picking up–although it is plainly not being driven by wage growth. I am wondering what role, if any, the pick up in inflation is playing in the slightly faster growth in GDP.