Tue Jan 31, 2023, 12:30 PM

US wage growth slowed in the final quarter of 2022

Source: ABC News

WASHINGTON -- Pay and benefits for America's workers grew at a healthy but more gradual pace in the final three months of 2022, a third straight slowdown, which could help reassure the Federal Reserve that wage gains won't fuel higher inflation. Wages and benefits, such as health insurance, grew 1% in the October-December quarter compared with the previous three months. That marked a solid gain, though it was slower than the 1.2% increase in the July-September quarter.

Fed Chair Jerome Powell and economists consider the data released Tuesday, known as the employment cost index, to be the most comprehensive gauge of labor costs. Powell last year cited a sharp increase in the index as a key reason why the Fed accelerated its interest rate hikes.

Powell has said that he sees rapid wage gains, particularly in the labor-intensive service sector, as the biggest impediment to bringing inflation down to the Fed’s 2% target. When restaurants, hotels, veterinary clinics and other services companies raise pay, they often pass along those higher costs by charging their customers higher prices.

In last year’s first quarter, total worker compensation had jumped 1.4% — the most on records dating to 2001. Before then, quarterly compensation growth had rarely topped 1%.

Read more: https://abcnews.go.com/Business/wireStory/us-workers-pay-slowed-final-quarter-2022-96787888

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4 replies	Author	Time	Post
US wage growth slowed in the final quarter of 2022 (Original post)	BumRushDaShow	Jan 31	OP
On the flip side, corporate profits are way up	SledDriver	Jan 31	#1
They should take the top 1% out of this formula	imaginary girl	Jan 31	#2
From the source. So over the last 2 years, real compensation has fallen by a total 4.2%	progree	Jan 31	#3
Adjustments for inflation - anyway, I'm showing off my red-blue CPI and Core CPI graphs	progree	Feb 1	#4

Response to BumRushDaShow (Original post)

Tue Jan 31, 2023, 01:15 PM

SledDriver (1,863 posts)

1. On the flip side, corporate profits are way up

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Response to BumRushDaShow (Original post)

Tue Jan 31, 2023, 01:18 PM

imaginary girl (792 posts)

2. They should take the top 1% out of this formula

What really matters is how much are paychecks for the bottom 99% going up?

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Response to BumRushDaShow (Original post)

Tue Jan 31, 2023, 01:53 PM

progree (10,149 posts)

3. From the source. So over the last 2 years, real compensation has fallen by a total 4.2%

("real" means inflation-adjusted)

But the quarterly increases in the last 2 quarters have exceeded inflation (CPI)

The source: https://www.bls.gov/news.release/eci.nr0.htm
[blah blah blah]

And now my summary, Total compensation, civilian workers

Quarterly increases:

Q3 increase was 1.2%, Q4 increase (today's report) was 1.0% (these are actual quarterly increases, not annualized numbers. These are not inflation-adjusted. They are seasonally adjusted.

The CPI increases: https://data.bls.gov/timeseries/CUSR0000SA0
Q3: 0.49%, Q4: 0.46%

12 month increases:

In current, i.e. nominal dollars
12 months thru the end of 2021: it was 4.0%.
12 months thru the end of 2022 it was 5.1%

in inflation-adjusted dollars:
12 months thru the end of 2021: it was -2.9%.
12 months thru the end of 2022 it was -1.3%

So for 2021 and 2022 combined, workers lost 2.9% plus 1.3% = 4.2% of their purchasing power
(the proper fancy math way comes out the same: .971*.987 = .958 => -4.2%)

But as the quarterly numbers show, in the last 2 quarters compensation growth has exceeded inflation.

Supposely the ECI is a much better gauge of total compensation than the average hourly earnings that come out on the first Friday of every month along with the payroll jobs report and unemployment rate.

Real average hourly earnings ("real" means inflation-adjusted): https://data.bls.gov/timeseries/CES0500000013

The latter jumped sky high at the beginning of the pandemic as the people who were laid off were disproportionately low wage workers in the restaurant and hospitality industries. On top of that is companies laying off "last hired, first fired" which skews towards lower wage workers on average being laid off.

Ever since the lockdowns eased, this measure has been declining through June. Since June there has been a slight increase.

The ECI, on the other hand, supposedly adjusts for these kinds of things, by looking at what's going on within each occupation, or something like that.

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Response to BumRushDaShow (Original post)

Wed Feb 1, 2023, 02:53 AM

progree (10,149 posts)

4. Adjustments for inflation - anyway, I'm showing off my red-blue CPI and Core CPI graphs

Last 12 months
CPI: +6.4%
CORE CPI: +5.7%

Last 6 months ANNUALIZED:
CPI: +1.9%
CORE CPI: +4.6% < == Last 3 months: 3.2% annualized

CPI - https://data.bls.gov/timeseries/CUSR0000SA0&output_view=pct_1mth
CORE CPI - http://data.bls.gov/timeseries/CUSR0000SA0L1E&output_view=pct_1mth

It clearly shows the much higher volatility of the CPI compared to the Core CPI.

It shows the CPI averaged much higher during the first 6 months of 2022, and that the opposite was true for the second 6 months. For the entire year, the CPI (+6.4%) was higher than the Core CPI (+5.7%)

As for what's proper in comparing past compensation to, there is only one answer: the regular CPI.

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