Bill Mitchell — US labour market – muddling along and real wages growth goes negative

On July 6, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2018 – which showed that total non-farm employment from the payroll survey rose by 213,000 and the unemployment rate rose by 0.2 per cent to 4 per cent in June 2018. The employment-population ratio was unchanged in June at 60.4 percent and has been largely stable since February 2018. The Labour Force Survey data, however, showed that employment only rose just 102 thousand in June 2018 and was accompanied by a substantial rise in the labour force (601 thousand) on the back of a surge in participation (up 0.2 points), which meant that total unemployment rise by 499 thousand. The broad labour underutilisation measure (U-6) also signalled weakness, rising by 0.2 points. There is still no evidence of a wages breakout going on although wages growth for blue-collar occupations has surpassed the white-collar occupations over the last 8 quarters. However, the data shows that real wages fell in June 2018 by 0.4 points. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.…

Bill deconstructs and interprets the latest US BLS report.

Bill Mitchell – billy blog
US labour market – muddling along and real wages growth goes negative
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

FRED Blog — Wages with benefits

Nominal wages generally increase, but the picture is mixed for real wages. The green line in the top graph shows real wage growth, which is negative a fair amount of the time. Bursts in inflation can counteract the usually small increases in nominal wages. In fact, the strong growth of real wages at the end of the past recession is mostly due to a short episode of deflation.

But wages aren’t the whole story. A job usually also involves other types of compensation, such as the employer’s contribution to retirement pensions, health and life insurance, paid vacation and other leave, and any taxes the employer pays on these benefits. These benefits are now a substantial part of the cost of an employee, and they appear to be growing. The top graph shows that labor compensation growth is frequently higher than real wage growth. We can make this point more clearly by using index values: In the bottom graph, we set both series at 100 in 1970 and let them run. Real compensation growth is significantly higher: the 60% increase looks much better than the 3% increase for real wages.

This is what business has been arguing for some time — look at the overall compensation rate rather than the wage rate. The problem is that consumer spending, debt service and expectations regarding future income depend on the wage rate.

FRED Blog
Wages with benefits

Suggested by Christian Zimmermann