I know that most mainstream economists are going to look at the latest figures on overall pay for American workers and keep claiming that the United States is experiencing or about to experience meaningful wage inflation. I just don’t know how they’re going to keep doing it in a way that convinces any fair-minded observers.
The data come from the Labor Department’s Employment Cost Index (ECI) and, to review, they’re the numbers that include both salaries and benefits as well as wages. Their two drawbacks are (1) they’re not adjusted for inflation; and (2) they’re issued quarterly, not monthly like the more closely followed wage statistics, so they’re not quite as timely.
Yet thanks to a (regular) quirk in the calendar, since we’re still in April, this newest ECI is timelier than usual. For it covers the first quarter of this year, which ended in March. And what it reports is that the year-on-year change in overall American workers total compensation – 1.79 percent – was not only much lower than that for first quarter, 2014-first quarter, 2015. The change, a drop of 34.91 percent from that previous 2.75 percent annual increase, also was the biggest such falloff by far since this trend began to be tracked in 2001. For good measure, the latest year-on-year change was the third weakest in absolute terms since then.
Matters don’t look any better when the current economic recovery is compared with its predecessor – the kind of analysis that produces the best (apples-to-apples) perspective. During the six-year economic expansion of the 2000s – which was largely fueled by bubbly borrowing and spending – the ECI rose by a total of 21.71 percent. During the current expansion, which has just become slightly longer, ECI is up 14.52 percent.
So it still seems perfectly justified to use “wages” and “inflation” in the same conversation. But putting them in the same (serious) sentence continues to get more difficult.