Links; some wage thoughts

August 23rd, 2018 at 6:06 pm

A few WaPo entries for your entertainment:

A deeper dive into similarities shared by Trump and Erdogan. And yet, despite their…um…sub-optimal leadership, our economy booms and Turkey’s tanks. I focus on what that has to do with a) dollars, and b) Fed independence.

My old pal Kudlow is sounding off on how the US economy is just “crushing it!” under Trump. Yeah…not so much. Co-written with Cong. Ro Khanna, who has some highly worthy legislative proposals in the mix which we link to in the piece.

Turning to other econ news, from the minutes of the latest Fed meeting, here’s their thoughts on wages:

Many participants commented on the fact that measures of aggregate nominal wage growth had so far picked up only modestly. Among the factors cited as containing the pickup in wage growth were low trend productivity growth, lags in the response of nominal wage growth to resource pressures, and improvements in the terms of employment that were not recorded in the wage data. Alternatively, the recent pace of nominal wage growth might indicate continued slack in the labor market. However, some participants expected a pickup in aggregate nominal wage growth to occur before long, with a number of participants reporting that wage pressures in their Districts were rising or that firms now exhibited greater willingness to grant wage increases.

Let’s take these in turn: Slow productivity growth, check, as I discuss here. But I also point out that if workers had more bargaining power, they’d be claiming a larger share of profits, which are uniquely high in such an allegedly tight labor market (and the wage share of national income is, in turn, uniquely low).

Lags…yeah, well, everybody always blames the lags. What’s more meaningful in this context is potential non-linearities, about which I hope to write more soon. Going from 7 to 6 on the unemployment rate does a lot less for wages than going from 4 to 3.

“Continued slack in the labor market…” I’m very glad to hear them say that, because I think there are a number of signs that there’s still some labor supply left to be absorbed in this expansion. See here re employment rates of prime-age workers.

Finally, they expect wages to pick up. I do too, both nominal and, as high energy prices subside, probably real wages as well. But workers have a lot of ground to make up and, absent clear signs of overheating, it’s important for policy makers not to get spooked by some real wage gains finally reaching many who’ve heretofore been left behind.

On that front, not that unit labor costs–labor costs per unit of production–are coasting at around 2%, the Fed’s target inflation rate, so little sign here, or, more importantly, in core inflation price gauges, of wage-push price pressures.

Source: My wage mashup series (5 wage series smushed together) minus 3-yr avg of productivity growth.


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3 comments in reply to "Links; some wage thoughts"

  1. Rima Regas says:


    So much has changed since the last time you wrote about how unemployment numbers are calculated, it would be really useful to take another look at who makes up the work force and how they’re counted, in the context of this discussion on wages.

    There has been a lot of reporting, over the past year, on seniors who aren’t retiring because they can’t. What is their share of the labor force? Does their presence, if significant enough, constitute a drag on wages?

    Could it be that Michael Hiltzik is right and employers will just do anything except pay workers more? (see

  2. Fred Donaldson says:

    Net family earnings is actually falling in recent months as interest rates increase, especially on new mortgages and current home equity loans. Recent data shows a huge decline in new home sales in the Northeast, and more Fed “tightening” will exacerbate the problem. Net earnings really mean total compensation minus total expenses.