Still No Wage Pressures to Speak Of…And Yet, People Speak of Them… | Jared Bernstein | On the Economy

August 9th, 2014

I don’t plan to publish this wage mash-up every quarter, but given the building and misguided pressure on the Fed to start raising rates to prevent allegedly incipient wage and price inflation, I thought I’d update the previous quarter’s result through the first half of this year.

Dean Baker and I give the rundown re this debate here, wherein we enumerate the factors that should lead the inflation hawks to draw in their talons:

To understand why continued support from the Fed is unlikely to be inflationary, consider three factors: the current state of key variables, the mechanics of inflationary pressures and the sharp rise in profits as a share of national income in recent years, along with its corollary, the fall in the compensation share.

The figure below speaks to the first point. It plot shows the first principal component of five wage or compensation series in nominal, yearly changes since the 1980s–a technique to summarize a bunch of related data series in a way that pulls out their common signal.

The series are:

Employment Cost Index: Hourly Compensation
Employment Cost Index: Hourly Wages
Productivity Series: Hourly Compensation
Median Weekly Earnings, Full-time Workers
Average Hourly Earnings, Production, Non-Supervisory Workers

Even as the labor market slowly tightens, there’s still no evidence of wage pressure. Growth rates have been flitting about 2% since 2009, a rate that’s both stable and historically low.

Also, someone suggested I publish the wage data so those so inclined can fool around with it. Here’s the spreadsheet—knock yourselves out!


Source: BLS, my analysis. Underlying series are yr/yr changes in nominal wages.

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