There was a time when the “data-dependent” Fed was concerned not so much about the unemployment rate or the number of monthly payroll gains, as it was with employee wage gains and whether there is any “pent up inflation” hiding in worker compensation. While it has since emerged that the “data” the Fed has been focused on is that of the daily moves in the Dow Jones, a glimpse at wage growth whose that unfortunately, for the vast majority of the US population, there simply is none.
First, here is a chart showing total average hourly earnings.
Aside from the modest decline in November from the rather substantial jump in October, the chart looks good, at least until one looks at the change in total hours worked for all employees, which declined from 34.6 to 34.5 hours, suggesting that wage gains were at the expense of a contraction in the work week.
The impact of this on weekly earnings is rather dramatic, which as a result of the decline in hours saw a more than commensurate drop. In fact, after rising nearly 3% in October, weekly earnings in November returned to the red zone with just a 2% increase, the lowest since June, and matched the average since 2011.
But nowhere is the lack of rising wages for most of the US labor force more visible than in the breakdown between wages for nonsupervisory workers, that segment of the US population that accounts for 100 million or 82% of the work force, and wage growth for the sliver of workers at the very top, those who make up the balance, i.e., the managers and supervisors.
Here is what wage growth looked like for all supervisory workers – rising at a paltry 2%, there is practically no core inflation-adjusted wage growth:
And here is the wage growth for these workers’ bosses, which also happens to include the economists living in various academic ivory towers and the Marriner Eccles building, and who have the erroneous tendency to equate what is happening to the paycheck of the broader population with their own.
So the next time you wonder where the Fed Chairwoman is seeing wage growth, the answer is simple: they are looking at your boss’ paycheck… yours, not so much.