Are Real Wages Rising? Yes, But Here's Why That Question is Harder to Answer Than You Might Think

JOSEPH POLITANO - (I write about monetary policy, labor markets, business, finance, and everything else that falls under macroeconomics.)
11/13/2023

The last few years have seen some of the strongest US labor markets since the turn of the millennium -- unemployment rates had fallen to generational lows, working-class wage growth hit the highest level since the 1980s, and millions of workers were able to switch to higher-paying jobs as part of the "Great Resignation." Yet we have also seen an enormous surge in inflation -- the Consumer Price Index (CPI) is up nearly 19% since the end of 2019, functionally matching the cumulative price growth seen across the entirety of the prior decade, with costs for food, energy, and transportation skyrocketing. So are American workers still making it out ahead?

The answer is, on average, yes -- cumulative growth in hourly compensation has exceeded inflation since the end of 2019, though it remains slightly below the trend of strong growth seen in the latter half of the 2010s.

Official average real hourly compensation is up since the pandemic but remains slightly below the pre-COVID trendline, and the same is true for real wages derived from the average hourly earnings data. However, real wages for "production and nonsupervisory workers" - i.e., the middle/working class jobs directly involved in service provision, manufacturing, or construction, excluding managers and the like - have risen faster than the overall average and are essentially in-line with what would be expected in the absence of a pandemic.

Granting that average real wages have increased since 2019, it's still important to check on the evolving distribution of real wages -- US income inequality is relatively high, so even if average wages are up that could easily reflect growth only accruing at the top end of the distribution. The good news is that median usual real earnings among full-time workers are also up, though they remain below the pre-pandemic trendline.

Even still, it remains clear that wage growth has been strongest at the lowest end of the wage spectrum, something corroborated by the fast wage growth rates for production and nonsupervisory employees and in traditionally low-wage industries, although low-end wage growth has cooled recently.

Carmel police are the worst.

Not necessarily the worst, but their reputation is known far and wide amongst those of us living in Central Indiana. However, Irsay is generally right on the principle - the white privileged elite are definitely treated with deference in affluent Carmel. But in his case, he was an impaired driver under the influence of prescription drugs and had no business driving. And the fact that he's such a well-known and prominent citizen, anything other than his arrest after failing field tests would have tarnished the force far more than arresting him would.

Irsay certainly believes that he was the aggrieved victim from his arrest, but there is not a single person that wouldn't have been treated likewise under identical circumstances. It really shows just how out of touch he is with how non-wealthy people have to traverse through their lives and interactions with LEO. I lived in Carmel for a few years in the 90s and almost every single day I'd see black people with hoopties pulled over with their drivers pulled out sitting by the side of the road. It used to be the home of DWB.

As it regards Irsay's speech and demeanor, he is a sober reformed addict whose earlier life abuse of drugs (and likely steroids) has left him as you see him - looking 10 years older than he is and appearing as a borderline Parkinson's sufferer. I'm not saying this from any inside or confirmed knowledge, just an observation of him over the last 40 years and his public acknowledgement of more than 15 rehab attempts in the past.

This is my point. If there is an expectation or concern that property will be devalued, the banks must take that into account as good stewards of their investors' money.

Jesus, the devaluation is based on redlining because the neighborhoods are predominantly black. They point out that comp homes in predominantly white areas are valued far higher. Read the rest of the article, that's what it's about.

And please, stop ignoring that this really isn't about the physical homes, it's about the location of the land underneath them. Land holds more overall value and that value will always increase if you build something more expensive and desirable on it than the structure being replaced. Wealthy people tear down multi-million dollar homes just to rebuild another more extravagant multi-million dollar home even though they paid full price for the home they tore down. Why? Because the price of the land will absorb the bulk of the teardown and rebuilding costs as it appreciates over time.

There is no such thing as "high risk" land unless we're talking about comes from former toxic chemical sites or otherwise polluted areas.

"Maintaining the status quo" means the homeowner keeps the property in the same shape (or improves it) as they bought it in.

Again, I thought such a simple concept would be more than obvious and instantly understood.

You don't remember 2008?

Did that have anything to do with "high risk" real estate or was it the entire market regardless of location, based on speculation and the lack of oversight and regulations in the mortgage industry?

My point should have been obvious. Give me a real world example where people with exceptional credit want to buy a home and said home depreciates because it's located in a "high risk" area. People are not stupid. There are less desirable neighborhoods absolutely, but prices there are baked into the valuations already. Qualified buyers are not seeking to intentionally lose money just like the banks. And I'm intentionally speaking about QUALIFIED buyers, not those pushed into homes that they couldn't afford by the lowering of credit standards and/or the prevalence of adjustable mortgages attached to bomb escalators when teaser rates end.

By your equation there would never be gentrification because THOSE neighborhoods start out as "high risk" until more affluent (usually predominately white) people start moving in and then they become highly desirable and the rise in values and taxes force renters of moderate means out of them.

This is my point. If there is an expectation or concern that property will be devalued, the banks must take that into account as good stewards of their investors' money. It has nothing to do with upward mobility or any other social concern.

Your point is idiotic. The US has a massive housing shortage. Distressed properties are refurbished and rundown homes and neighborhoods are gentrified incessantly.

If borrowers maintain the status quo, the property always increases. It never decreases. I have no idea what world you live in. People buy distressed properties and multiply their investments every day of the year. Your scenarios do not exist in today's world except for maybe Detroit or other blighted urban areas.

And that is not the type of areas we're talking about.

I'm aware, but redlining is based on location. Not on race.

And the location of redlining is almost ALWAYS in minority-occupied areas(#44). Please learn some history and stop trying to whitewash systemic discriminatory practices in vanilla language specifically meant to hide the real intent of these acts.

#57

If that's how you read what I wrote you are indeed hopeless. I addressed those things directly and real estate NEVER decreases in value. As I explicitly stated, creditworthiness is the bank's standard, not location. Don't you realize people buy distressed properties and fix them up every single second of the day? Why would someone with great credit allow their own asset to suffer from physical decline? It's moronic to reach such an illogical assumption.

"Areas" are not high risk, borrowers are. Risk is built into the price/value equation of the real estate - it's called "location". To say "areas" as high risk is discriminatory prejudice masquerading as a justifiable business practice.

And no, white buyers - especially flippers or investors - would NOT have any problem getting loans if they're creditworthy. Again, how you infer that they too would have problems was never written, just the opposite.

And here's a related finding by Brookings:

Each one of the articles you provided had to do with redlining, which is based on neighborhoods. And in the text of each it mentions that these neighborhoods are considered to be high risk.

Do you think banks should be obligated to use their customers money on high-risk loans?

JFC. Would you like to explain how property is "high risk"? Is a house going to up and run away and leave the bank with no asset? You do know that homeowners insurance is mandatory, right? And it protects the bank's loan, right? Either the mortgage applicants have sufficient credit or they don't, period - and that opens up another tangent on systemic racism where poorer people often start their adulthoods with little financial acumen and many have childhood medical debt on their records before they've ever had any type of personal account at all.

"High risk" is bank speak for "the wrong people live in these neighborhoods, so we'll refuse to lend to them." However, when white investors or gentrifiers seek loans in those same neighborhoods they do not face the impediments that blacks do.

And systemically, land has been stolen from blacks since slavery was abolished.

We can discuss it, but "systemic" racism would imply that the "system" itself included elements that were explicitly placed there to create different outcomes based on race.

For instance, asking for one's race on a credit card or college application would be an example of possible system racism, if the information consumer was using race data to influence decision calculus.

Like these all too recent examples in just one industry?

In late September, for example, the GOP majority went after Defense Secretary Lloyd Austin's salary. Soon after, Republicans thought it'd be a good idea to after Energy Secretary Jennifer Granholm's salary, too.

Republicans have gone after Transportation Secretary Pete Buttigieg's salary. And Interior Secretary Deb Haaland's salary. And EPA Administrator Michael Regan's salary. And Bureau of Land Management Director Tracy Stone-Manning's salary. And Securities and Exchange Commission Chairman Gary Gensler's salary.

In a few hours, the House's GOP majority will take up a measure to go after White House Press Secretary Karine Jean-Pierre's salary, too.

Letting Republicans have control of any branch of government insures that branch will be dysfunctional and led by delusional partisan sycophants always placing grievances above good governance and the whole public's good.

The three deals contain many of the same or similar terms, including a 25 percent general wage increase for U.A.W. members as well as the possibility for cost-of-living wage adjustments if inflation flares.

The tentative agreement with G.M., the largest U.S. car company by sales, requires approval by a union council that oversees negotiations with the company, and then ratification by a majority of its 46,000 U.A.W. workers.

With this notch in their belts, UAW is retargeting the other domestic non-union manufacturers in a campaign to unionize their workers along the lines of the Big 3 workers.

Organized labor is not only rebounding, they're making great strides in bringing back a more vibrant and viable middle class for American workers as these gains will trickle down throughout many industries and raise wages for millions in time.

On Sunday in Sioux City, Iowa, Mr. Trump wrongfully thanked supporters of Sioux Falls, a South Dakota town about 75 miles away, correcting himself only after being pulled aside onstage and informed of the error. It was strikingly similar to a fictional scene that Mr. Trump acted out earlier this month, pretending to be Mr. Biden mistaking Iowa for Idaho and needing an aide to straighten him out.

In recent weeks, Mr. Trump has also told supporters not to vote, and claimed to have defeated President Barack Obama in an election. He has praised the collective intellect of an Iranian-backed militant group that has long been an enemy of both Israel and the United States, and repeatedly mispronounced the name of the armed group that rules Gaza.

During a Sept. 15 speech in Washington, a moment after declaring Mr. Biden "cognitively impaired, in no condition to lead," the former president warned that America was on the verge of World War II, which ended in 1945.

In the same speech, he boasted about presidential polls showing him leading Mr. Obama, who is not, in fact, running for an illegal third term in office. He erroneously referred to Mr. Obama again during an anecdote about winning the 2016 presidential race.

"We did it with Obama," Mr. Trump said. "We won an election that everybody said couldn't be won, we beat ... " He paused for a beat as he seemed to realize his mistake. "Hillary Clinton."

Both companies have been in marathon talks with the union and could reach tentative deals as soon as Friday, though there are certain issues that may take longer to resolve and push talks into the weekend ... All tentative deals will still require ratification by a majority of each company's UAW workforce to take effect. If workers reject the agreements, they will continue their strikes.

UAW workers at Ford have agreed to suspend their strike and return to work as they consider the contract offer and plan a ratification vote. The union is expected to agree to similar strike suspensions if it reaches tentative deals with GM and Stellantis.

That would mean a return by all 40,000 striking workers, once the companies are able to restart their giant factories and warehouses.

These people still think of America
in terms of Green Acres and the Andy Griffith Show Birth of a Nation and Gone with the Wind.

FTFY

The sharp increase came due to contributions from consumer spending, increased inventories, exports, residential investment and government spending.

Consumer spending, as measured by personal consumption expenditures, increased 4% for the quarter after rising just 0.8% in Q2. Gross private domestic investment surged 8.4% and government spending and investment jumped 4.6%.

At a time when many economists had thought the U.S. would be in the midst of at least a shallow recession, growth has kept pace due to consumer spending that has exceeded all expectations. The consumer was responsible for about 68% of GDP in Q3.

It was perhaps Mike Johnson's short tenure in the House that allowed him to win the gavel. But now he faces a terrifyingly steep learning curve and almost no margin for error.

I couldn't disagree more. Johnson has a huge orange margin of error and everyone knows his name. As a matter of fact, I expect that Johnson will do Trump's bidding and thwart the legislative process unless it's one personally approved by MAGA itself.

And I also think we've just seen the public arrival of Trump's Vice Presidential choice for 2024. Johnson's ascent today is just the latest - and perhaps most troubling - continuation of the coup started in 2020. Now Trump has one of his chief election deniers in position to affect any victory by Joe Biden next year and the Democrats can do nothing about it but cry.

Heaven help us.

#16

Good catch Gal. Meadows has to be careful with what he says because Cassidy Hutchinson witnessed quite a few conversations herself and is fully cooperating with the authorities.

As I see it, Meadows is caught between a rock and a hard place and eventually must decide whether he enjoys his life outside of our justice system more than keeping secret the damning information he undoubtably knows regarding Trump and his fellow coup plotters and election deniers.

From the Congressional Investigation it was clear that if Meadows ever turned on Trump...

Trump isn't the only one who should be sweating bullets right now. Meadows was the conduit for most of the 1/6 communication for Trump according to Cassidy Hutchinson. He also knows which GOP reps asked for pardons and he also attended the Willard Hotel confab on 1/5 if my memory is correct.

Meadows has the capability of putting quite a few Republicans in jail for participating in the conspiracy which 2020 election denialism is and was. Gonna be a restless sleep tonight for a lot of Trumpers.

While I agree with the sentiments and points already expressed, the pandemic itself was the genesis of most of general cluelessness of economic forecasts since 2020.

I had a discussion with a coworker in late+ February 2020. I was paying attention to Covid's inevitable spread, and I read up on the history of the Spanish flu epidemic 100 years earlier. I told my coworker that what we think of as normal was going to change - some of it forever. And that's true. Some industries and businesses died and won't be returning, and others were invented or became more relevant and now are major players in the overall economy.

Forecasters only have the past from which to predict the future. Our future changed in ways heretofore unimagined and the role the federal government played cannot be understated. Although the demonization of the medical profession needlessly cost lives, it was indeed a miracle that millions upon millions were not tossed out into the streets when our economy temporarily shutdown and then reordered itself.

When all the know-it-alls were predicting recession, I simply looked at the number of job openings exceeding the available supply of workers and realized that until that gap closes, even people losing jobs in one industry can readily find jobs in others - sometimes at higher rates of pay than the jobs they're leaving. There is still going to be pressure to keep wages rising even if slower than before, but household incomes remain stable if not slightly rising even if they're not completely keeping up with inflation.

Corporations are making record profits, markets were rising on consumer spending and even with interest rates up their is still a dearth of housing. So in general, many Americans are doing fairly well considering, and many were able to save during the pandemic and were anxious to resume more normal lives which translates to steady if not uptrending consumption. These are not the conditions of usual recessions.

The descriptions of what Meadows allegedly told investigators shed further light on the evidence Smith's team has amassed as it prosecutes Trump for allegedly trying to unlawfully retain power and "spread lies" about the 2020 election. The descriptions also expose how far Trump loyalists like Meadows have gone to support and defend Trump.

But, as described to ABC News, Meadows privately told Smith's investigators that -- to this day -- he has yet to see any evidence of fraud that would have kept now-president Joe Biden from the White House, and he told them he agrees with a government assessment at the time that the 2020 presidential election was the most secure election in U.S. history.

Meadows told investigators he believes the Justice Department was taking allegations of fraud seriously, properly investigating them, and doing all they could to find legitimate cases of fraud -- and he told investigators he relayed all that to Trump a few weeks after the election, the sources said.

The only fraud in the 2020 election was committed by Trump pushing what he knew was a lie yet benefited him to the tune of hundreds of millions of dollars. And Trump continues to commit fraud in separating the true believers from more of their money under false pretenses in perhaps the largest grift in the history of America.

This is always the relationship between civic democracies and the broken states where strongmen thrive and dominate. Civic democracy operates through an organized competition between different stakeholders in society. It requires a consensus to litigate disagreements through a prescribed set of rules. The breakdown of those rules creates an opening for strongmen who traffic in raw power and sell their ability to impose order. It is both the cause and result of the species of civic and moral degeneracy we see as the mother's milk of Trumpism.

Chaos and strongmanism aren't opposites but two sides of the same coin. One needs and breeds the other. As big a comedy as the House GOP Speaker debacle is it illustrates the same basic challenges and choices we face as a society and perhaps more broadly abroad: distributed power, agreed upon rules on the one hand or chaos and domination on the other. That's the civic democracy and authoritarianism question and it's playing out before us in the House GOP caucus dark comedy.

The House GOP is showing the world that they no longer believe in nor respect democracy if it stands in the way of them elevating the strongman of the minority's choosing, damn to hell what the majority wants. The Democrats would be wise to make clear that Americans and the world sees what's going on in front of their very eyes. Republicans crap on the Constitution and laws unless they align with the authoritarianism they so blatantly are attempting to institute.

Economists generally expect growth to slow late this year and into early next, nudging unemployment higher and gradually weighing inflation down. But several said the economy had been so hard to predict since the pandemic that they had low confidence about future projections.

"The forecasts have been embarrassingly wrong, in the entire forecasting community," said Torsten Slok at the asset manager Apollo Global Management. "We are still trying to figure out how this new economy works."

Not only has the recession failed to materialize so far, but growth has been surprisingly fast. Consumers have continued shelling out money for everything from Taylor Swift tickets to dog day care. Economists have regularly predicted that America's shoppers are near a breaking point, only to be proved wrong.

Economists are now asking whether inflation can slow sufficiently without a pullback in growth. A landing so painless would be historically abnormal, but inflation has already cooled to 3.7 percent in September, down from a peak of about 9 percent.

So the experts and prognosticators remain stuck with failed forecasts and head scratching data much of it running counter to what their analysis predicts. And in the end, they consensus opinion is that no one has any firm idea how all of this will play out over the next two years.