More evidence appeared today that, if it’s true that inflation is starting to pick up (after years of deep slumber), America’s workers don’t deserve any blame. The Labor Department today released its latest data (for June) on overall price increases in the economy, and for price-adjusted wage increases. They and the department’s databases reveal that the workforce on the whole is barely, at best, keeping up with the cost of living.
According to the Labor Department, core inflation (i.e., prices with food and energy costs omitted, since they’re exceptionally volatile) rose 2.26 percent between June, 2015 and last month. How did inflation-adjusted wages do for the private sector? They rose only by 1.52 percent. (The Labor Department doesn’t include government workers’ wages in these statistics, since they’re determined by politicians’ decisions, not by the fundamental state of the economy.)
Workers did a little better between the previous Junes. Core inflation increased by 1.76 percent, and their price-adjusted wages improved by 1.84 percent.
But between June, 2013 and June, 2014, the story was substantially different. While core prices were increasing by 1.96 percent, real wages weren’t increasing at all. That is, they were completely flat.
Strengthening the case that real wage growth is anything but strong: June private sector wages saw a sequential drop of 0.19 percent, and have fallen for two of the last three months. As a result, hourly private sector pay is now down since March. And since the economic recovery began, in June, 2009, real private sector wages have risen only 3.49 percent.
The story in manufacturing, which historically has generated most of the economy’s best-paying jobs, is somewhat better over the short-run and somewhat worse over the long run.
Even though real manufacturing wages decreased on month in June (by 0.46 percent, much more than overall private sector pay) they rose 2.37 percent year-on-year – considerably faster than the private sector pace. Indeed, through May, after-inflation manufacturing wages had grown sequentially for eleven straight months.
June’s yearly manufacturing real wage hike was also more than twice as great as that between the previous two Junes – just 0.86 percent. But during the twelve months before, real manufacturing wages actually decreased – by 0.19 percent.
Longer-term, moreover, manufacturing remains a decided real wage laggard. Since the recovery’s June, 2009 onset, inflation-adjusted hourly pay has improved by only 0.93 percent.
Economists worry about wage inflation – and the tight labor markets it implies – because businesses have tended to react by raising prices to compensate, and that’s tended to prompt workers to press pay demands even more aggressively. The consequent spiral can be difficult to stop or even slow.
Of course, for this kind of action-reaction cycle to take hold, wages would first have to catch up with living costs. The June inflation and real wage figures show that workers might still be short of even that modest goal.