econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 28 May 2016

Wage Erosion Resumes

from Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI

The Fed may welcome higher inflation, but it is important not to forget what inflation does to real wage growth - which is what folks on Main Street depend on. Inflation eats away at wages, and as a result, real wage growth has been declining since last fall.

In fact, yoy real average weekly earnings (AWE) growth peaked just under 3% at the beginning of 2015 in both the goods-producing sector and the service-providing sector. Real AWE growth in the goods-producing sector is now under 1½%, i.e., about half of what it was at the beginning of 2015 (thin blue line), while real AWE growth in the service-providing sector is even lower, and is approaching January's 15-month low (thick blue line).

So, even though the pick-up in nominal wage growth is welcome, it is worth recalling that, in the fall of 2014, when the economy was still accelerating (and not decelerating as it is today), Ms. Yellen put off rate hikes because yoy real (i.e., inflation-adjusted) wage growth was essentially "nonexistent," being not far above zero. Indeed, in mid-2014, she had effectively declared that clearly positive real wage growth was a precondition for Fed rate hikes, stating that "[t]here is some room ... for real wage gains before we need to worry that that's creating an overall inflationary pressure for the economy."

But as ECRI noted at the time, "because higher inflation eats away at real earnings growth," historical evidence showed "that it would take an inflation cycle downturn for real earnings growth to satisfy Ms. Yellen's condition for initiating Fed rate hikes" (USCO Focus, October 2014).

Today we have an inflation cycle upturn in progress, eroding real wage growth, making Ms. Yellen's 2014 real wage growth goals even more distant. It is also likely to frustrate hopes for a sustained revival in real consumer spending growth.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Big Mess in Italy
Are You Feeling the Economic Surge?
News Blog
Are All Collateralized Loan Obligations Equal?
A Third Of Homes Sold For The List Price Or More In August 2016
It Is Still Not Too Late To Find A Seasonal Job
Infographic Of The Day: Are You A Good Listener
Early Headlines: Italy Votes 'No', Renzi Resigns, Euro Plunges 2 Pct, Asia Stocks Down, Trump Foreign Policy By Tweet, Dakota Pipeline Stopped, India Serv. PMI Contracts And More
Most Read Articles Last Week Ending 03 December
The World's Most Creative Cities
The Countries Where People Aren't Interested In Politics
Fidel Castro And The Revolution That Almost Wasn't
America Trumps Allies In Defense Spending
What We Read Today 04 December 2016
How Much Money It Costs To Make Money
Multiple Jobs Needed To Make Ends Meet
Investing Blog
Market Sector Analysis: 04 December 2016
Trumponomics: The New Hope
Opinion Blog
The Labor Market Working Nine To Five
Why Did Trump Win? A Different Perspective, Part 3
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
05Dec2016 Pre-Market Commentary: US Stock Future Indexes To Open Higher, DOW To Hit New Record, Crude Prices At 16 Month High, US Dollar Softens, Investors Ignore Italy's Political Shakeup
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved