No doubt about it – this week’s government report on U.S. real wages was a dog. (No offense to canine lovers – of which I’m one!) And the news, as usually the case, was particularly bad for manufacturing workers, as their inflation-adjusted hourly pay in March dipped back into technical recession territory. That is, their real wages are down on net since January, 2016 – a much longer time-span than the two straight quarters of cumulative growth contraction that comprise most economists’ definition of a recession.
Manufacturing’s real wage recession returned thanks largely to a sizable 0.65 percent sequential drop between February and March. That was the worst such deterioration since November, 2011’s 0.95 percent. The only consolation for manufacturing workers – the decrease followed a 0.56 percent monthly improvement in February. That was the best such performance since August, 2015’s 0.57 percent.
But underscoring manufacturing’s real wage problems was the March year-on-year decline. It was only 0.09 percent. And the rate of decrease was slower than that between the previous Marches – 0.46 percent. All told, however, such price-adjusted hourly compensation in industry is now down by that 0.09 percent figure for more than three years.
Moreover, manufacturing’s real wage performance remains much worse than for the private sector as a whole. (These after-inflation wage analyses omit the numbers for public sector workers’ because their pay largely reflect politicians’ decisions, not the workings of free market forces. In fact, the Bureau of Labor Statistics, which compiles and publishes these figures, doesn’t even track real wages for government employees.)
Private sector workers overall didn’t enjoy a great hourly pay month in March, either. Their constant dollar wages fell sequentially by 0.27 percent – the first such decline since October’s 0.09 percent, and the biggest since February, 2013’s 0.49 percent. Moreover, the private sector’s monthly wage performance can’t be explained by good February numbers – since that month they were only up by a so-so 0.18 percent.
Yet private sector real wages in March were 1.21 percent higher than in the previous March, which continued a solid run for this indicator. And the new March year-on-year figure was considerably better than that between the previous Marches – 0.47 percent.
The manufacturing-private sector real wage comparison looks even worse when their changes during the course of the current recovery are examined. Since mid-2009, after-inflation private sector hourly wages are up 5.72 percent. That’s hardly gangbusters. But it’s a pace more than ten times faster than that for manufacturing – a barely detectable 0.47 percent.
More discouraging for the manufacturing sector: That gap has been widening. From the onset of the current recovery through March, 2018 overall real private sector wages had risen about 7.8 times faster than real manufacturing wages. Through this past March, the exact size of that growth difference was 12.2 times faster.
I’m still convinced that at least some of manufacturing’s relatively bad recent real wage performance (despite strongly growing payrolls) stems from the unusually low quality of workers the sector has needed to attract lately. But as the next presidential election approaches, what I think matters even less than usual, at least politically. The big question is whether the manufacturing workers who turned out for President Trump will be satisfied with this explanation.