The new government figures that came out this morning teach a good lesson about the dangers of seizing on one month’s worth of data to identify a trend. It’s true that they show that after-inflation American wages fell month-on-month in August for the third time in the last five months – which seems to contradict my (tentative!) conclusion that paychecks in this country might finally be getting fatter on a sustainable basis for the first time in this economic recovery.
At the same time, looking back over a longer, and more revealing, time period keeps the wage improvement story pretty well intact.
The new Bureau of Labor Statistics findings show that inflation-adjusted wages for the private sector overall dropped by 0.09 percent in August over July’s levels. The year-on-year results failed to impress either. At 1.32 percent, they were weaker than the 2.13 percent gain registered for the previous Augusts, and they were the second worst such figure since January.
But 2016’s year-on-year numbers are thrown off some by the lousy wage performance of 2014 – especially its first three quarters. So any strength in 2015 would have looked especially robust thanks to the “easy comps” effect well known to investors. (Think of the logic behind the phrase “no place to go but up.”) And it’s that much harder to keep up such momentum.
Even so, here are the trends for all the Augusts since the current economic recovery began:
They should make clear that, however uneven, the last two years have been qualitatively better than preceding five. Another little positive note. Although the 0.37 percent monthly improvement originally recorded for July remained unchanged, the June monthly 0.19 percent slippage was revised up to only -0.09 percent.
Similar trends are evident in manufacturing. August real wages dipped on month by 0.18 percent. But July’s monthly results were upgraded from a 0.18 percent gain to 0.28 percent. June’s 0.46 percent decrease was unchanged.
August’s year-on-year advance of 1.31 percent was also the second weakest since January, and well below the previous August’s 1.91 percent. But once again, a dreadful 2014 (complicates matters) – and puts the latest annual improvement in a better light. If you’re skeptical, check out manufacturing’s August-to-August real wage performance during the current recovery:
Again, the most recent two readings are orders of magnitude stronger than the previous five.
Not that anyone should be popping champagne corks yet. According to the new data, the typical American worker in the private sector has seen his or her real wages rise by 3.88 percent during the current recovery – which is now more than seven years old. The typical inflation-adjusted manufacturing wage is up 1.03 percent. Complacency is still harder to justify when it comes to U.S. wage trends than alarmism.