Reclaiming Common Sense

 Getting Back to Work. Getting paid more per hour, too


The monthly Jobs Report, or Employment Situation Report, is a report that is greatly anticipated. What is the unemployment level? What is the unemployment rate? How many workers were added to the economy? How many jobs were added to the economy? What is happening with the workforce participation rate? Recently there has been an emphasis in the media regarding wage growth. There have been discussions regarding the FACT (False Assertion Considered to be True) that workers have not received pay raises "for years." Now there is concern that as "workers become scarce" wages will "have" to rise. Higher wages means a higher cost of goods and services and potentially consumer inflation tied to wage inflation. There are any things that need to be recognized:

  • Seasonally adjusted data does not do much good with regard to this discussion.
  • We can see disposable income as wages improve
  • We can see disposable income rise as more workers are working
  • The multiplier effect of more people working for more money will allow our economy to grow. 
  • We had income contract during the "Great Recession."

The April 2018 Jobs Report was huge from an Unemployment Level perspective. Jobs rose, unemployment fell. Jobs are only a part of the picture.  Wages rose during April.  All sectors saw record levels of average hourly wages during the month of April. When wages are multiplied by workers a measure of wage productivity can be measured: Gross Wages. Gross wages, when converted from weekly to monthly or annual wages, can measure growth over time. The point that has to be made here is that not all sectors pay the same hourly wage. Also, another point, some sectors are more seasonal than others, and when low wage paying jobs surge in employment that brings down the average wage.


Average Hourly Wages have been rising. If you examine the first chart that shows the three month average hourly rate you can see that since 2006, with the exception of virtually all of 2009, the average hourly rate has been rising. Just looking at April 2014 ($21.12,) April 2015 ($21.62,) April 2016 ($21.82) April 2017 ($22.46,) and April 2018 ($23.19) you can see that the average hourly rate for the total private sector has been rising. This has not received much attention because the Table B wage data is seasonally adjusted (page 5 of 39.) There is also a major difference between the reported  April Seasonally Adjusted Average wage of $26.84 (up from March 2018 $26.80 and April 2017 $26.17) is significantly different from the calculated average hourly rate of $23.19.  The seasonally adjusted annual wage growth is 2.56%. The non-seasonally adjusted


Record Hourly Wages during April.  This past week the Twitter account associated with this column published graphics from the FRED (Federal Reserve Economic Data) website.

  • Information Wages, Construction Wages, Manufacturing Wages, and Other Service Wages were at record Levels.
  • Leisure/Hospitality, Professional/Business Services, Education/Health Services, and Financial Activities were at record levels.
  • The Manufacturing Sector and the TTU (Trade, Transportation, and Utility) Sectors also had record average hourly wages.


Six Sectors with  Record April Levels of Workers. The April Sector article, "All Sectors Added Workers this April" detailed how all sectors added workers last month and that Six sectors were at record worker levels. The six sectors with record April workers were TTU, Professional Business Services (PBS,) Leisure and Hospitality (LAH,) Other Services (OS,) Education and Health Services (EHS,)and Financial Activities (FA.) The article "Record Weekly April Wages" detailed how four of these sectors had the lowest weekly wages: TTU, EHS, OS, sand LAH. Leisure and Hospitality had an average weekly wage of just $418.


Annual Income (Gross Wage) is Rising. When the growth in workers is multiplied by the growth in wages, Gross Wages rise dramatically.  We had a wage recession between November 2008 and March 2010. Total private sector income from weekly wages is up 5.19% compared to April 2017.


There are numerous ways to analyze the data. Rolling Year wages, Current Year wages, three month rolling average weekly wages. Once seasonally adjusted wages are multiplied by seasonally adjusted weekly wages the result is seasonally adjusted garbage. Wages will rise and fall for sectors as demand rises and falls. What is important is to understand is that the wage  growth has been under-reported for years, that wage growth has been held back because the sectors in which we have seen the most worker growth are among the lowest paid sectors, and that we will see the average wage rise as higher wage earners return to the market. Also, Higher Gross Weekly wages should spur retail sales, home sales, and demands for more workers to provide services. This should continue to boost our GDP.


It's the Economy.