Tuesday, September 30, 2014

The Wage Stagnation Myth (excerpt)

Yesterday, we learned that personal income rose 0.3% during August, while the personal consumption expenditures deflator decreased less than 0.1%. On a y/y basis, the former is up 4.3%, while the latter is up 1.5%. So real incomes are growing at a solid pace.

There is a widespread myth that real incomes have been stagnating for many years. That’s apparently true based on mean real income for households. I have lots of issues with this statistical series, including the impact of demographic trends on it. Consider the following:

(1) While real mean income per household has been stagnating since 2000, real pre-tax compensation per payroll employee (including wages, salaries, and supplements) is up in record-high territory at $61,307 during August, which is an increase of 16.8% since the start of 2000.

(2) Real wages and salaries in personal income is also in record-high territory, up 1.8% y/y and 14.6% since the start of 2000. Real average hourly earnings of production and nonsupervisory workers is up 1.1% y/y and 13.4% since the start of 2000.

Today's Morning Briefing: Life After QE. (1) Will end of QE kill the bull? (2) Market is getting nervous about Fed rate hikes next year. (3) Can Richard Fisher really move markets? (4) More Fed doves than hawks, especially next year. (5) Charles Evans gets to vote in 2015. (6) Bullard says time to drop “considerable time.” (7) Dudley puts the dollar on the table. (8) More tightening tantrums ahead. (9) Profits for accountants. (10) Regional surveys showing very strong economy during September. (11) The wage stagnation myth. (More for subscribers.)

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