Skip to content

A Double Boost: Rising Wages, Slow Price Increases

Wages – average hourly earnings – rose a decent 0.3 percent in January for production and nonsupervisory workers, and an even more impressive 0.5 percent for all workers. Both are up 2.5 percent from a year ago, about as strong a gain as we’ve seen in the current expansion, but well below the peak rates of about 4 percent per year in prior expansions.

But that’s only part of the story. When wages are adjusted for price changes, real wages are up at a 2.1 percent annual rate through December. The pace has been above 2 percent since January 2015, and is well above the long-term average pace of just 0.3 percent since 1985. That faster pace of growth has helped real hourly earnings rise back above the $9.00 point for the past 12 straight months – the first time since the mid-1970s (see chart).

Faster nominal wage growth would be helpful to consumers, and that may happen soon if labor markets continue to tighten. But the double benefit of rising nominal wages and slow price increases shouldn’t be overlooked.

Click here to sign up for the Daily Economy weekly digest!

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: