I’m working on a longer-term wage project and made the figure below as part of it. It’s from a principal components analysis of five different and pretty diverse, compensation/wage series:
Employment Cost Index: Hourly Compensation
Employment Cost Index: Hourly Wages
Productivity Series: Hourly Compensation
Median Weekly Earnings, Full-time Workers
Average Hourly Earnings, Production, Non-Supervisory Workers
The plot shows the first principal component of the five series–a technique to summarize a bunch of related data series in a way that pulls out their common signal [update: earlier version said “principle” instead of “principal” but I was corrected by some big shot, persnickity, word maven of an economist] –in yearly changes since the 1980s. And the punchline is that there’s just no wage pressure to speak of. Growth rates of disparate series are all bumping at or near historical lows.
This is a function of labor market slack and a reminder that including wage movements in the Fed’s dashboard is essential. Check that–given a) how little of the economy’s growth has reached wage earners, b) the importance of broad-based earnings in terms of robust consumer spending and a stronger recovery, and c) the idea that wage targeting may be more revealing vis-a-vis labor market slack than price targeting (as I show here, the core PCE has basically wiggled between one and two percent for over a decade!; not so with nominal wages)–change “including wage movements” to “upweighting wage movements” in the dashboard.
Sources: BLS, BEA, my analysis.