Along with the national and regional statistics economy-trackers follow, I find it useful in my travels to talk to people on the ground. If you want a general feel for the local economy, ask around and—discounting for the non-random, convenience sample—you can often get a pretty good idea.
The sense I get from folks is that while they sense that things are getting a bit better and they’re more hopeful than they were in the recent past, they’re not quite feelin’ the love. Higher gas prices are definitely a big part of the mix—cabbies are overweighted in my sample—but a lot of folks feel like the recovery hasn’t quite reached them yet.
I think this is one of the reasons: it’s a plot of the annual percent change in real weekly earnings, net of any non-wage benefits. Take out taxes (and add in the payroll tax cut) and this is what’s happening to real paychecks.
And, as you can see, they aren’t going as far they were a year ago. As the table below shows, that’s largely a function of faster inflation. The table decomposes the growth in weekly earnings into three parts: inflation (which subtracts from real wage growth), hours’ growth, and hourly wage growth.
Hours continue to grow as the expansion gains pace, but they’ve decelerated a bit. The nominal hourly wage has been trucking along at around 2%. But faster price growth is sucking more out of your paycheck’s buying power than it was a year back.
Obviously, the gas price spike is a big part of the story, but it’s also the case that 8.3% unemployment is a signal of a slack labor market. And in slack labor markets, there’s little pressure on hourly wage growth.
So if things don’t feel that great to a lot of working people right now, there’s a reason: they’re still struggling.
Thanks for the post. Would be interesting to know what real wage changes look like since the start of the recovery excluding the top 1 percentile of earners.
Do you have access to these numbers anywhere?
Keep up the good work – I read all your posts though I comment rarely.
Don’t have that but can get something a bit like it. Will try to post soon.
Thanks – looking forward to seeing what you find. My back of the napkin hypothesis is something along the lines of: a lot of the growth (or maintenance) of real wages would be driven by higher earners, so lower earners are not represented by the broader wage numbers. They might be hurting more than the numbers would suggest.
Mr. Bernstein …. What is your take on the JOBS Bill that just passed the Senate?
Meh. It’s not going to do anything on the jobs side near term and I worry about weakening some of the SEC rules to protect investors. But some of the investor limits that it lifts are arbitrarily low so perhaps it will channel some venture capital to startups that need it but wouldn’t otherwise get it. One advocate of the bill gave me a convincing rap that parts of the bill–crowd investing–will prevent young firms from having to go public before they’re ready to do so. And it is true the some small guys get swallowed up by big guys too quickly, especially in IT.
There are a couple more issues.
1) The labor force grows at a little over 1% a year, due to immigration and kids aging into it. So GDP growth has to really be at least 1% for us to break even.
2) If we are breaking even, what that really means is that about half of us are doing better, and about half of us are doing worse. That doesn’t give a general sense of improvement or prosperity. It seems to me that you’d need 1-2% GDP growth “cushion” for anyone to feel any serious improvement. And if things are bad to start with and people are waiting for us to clear a Mendoza line of suck, well, 3% feels pretty anemic.