The days when Washington releases more than one set of economic data are always a little frustrating, and today was no exception. Shortly before the Federal Reserve put out the July industrial production figures, the Labor Department issued that month’s numbers on inflation-adjusted wages. They deserve attention because they add – albeit modestly – to the evidence that seven years after the current economic recovery began, American workers are finally starting to see respectable boosts in their constant dollar pay.
After-inflation private sector hourly wages were up 0.37 percent month-to-month in July – a nice turnaround from June’s 0.19 percent decline (the dip that was originally reported). More important, on a July-to-July basis, inflation-adjusted wages rose by 1.71 percent. That matched June’s rate – which was revised up from 1.52 percent.
Even the apparent fly in this ointment doesn’t look so bad upon closer inspection. These annual increases in real wages were smaller than the same 2014-2015 figures. But the numbers for that year looked strong largely because the 2013-2014 real wage improvement was almost non-existent. As stock investors would say, it was easy to beat those “comps.” Since then, we’ve seen two straight good year-on-year increases.
The bounce back in real manufacturing wages was even stronger. Between June and July, they advanced only by 0.18 percent. But that was way better than the 0.46 percent decrease the previous month. (A figure that was also left unrevised.)
Year-on-year, July hourly pay for manufacturing increased by 2.07 percent – more than for the private sector overall. It’s true that the improvement was slower than that between June, 2015 and June, 2016 (2.37 percent). But it was faster by a wider margin that the July, 2014-2015 rise (1.43 percent).
Since broader inflation-adjusted compensation statistics that include benefits also show a recent pickup, you’d figure that this is great news for Democratic presidential candidate Hillary Clinton and bad news for her Republican opponent Donald Trump. And this conclusion could be justified.
But the new real wage numbers still leave two, potentially decisive, questions unanswered: First, will voters be more focused on this good news or on how slowly their pay has risen for so long – only 3.88 percent for all private sector workers during the recovery so far, and an even more paltry 1.12 percent for manufacturing workers? And second, how long will this favorable trend last?