yellow flag for aggregate wages
Now that we have the July inflation reading, let’s take a look at real wages.
First of all, nominal average hourly wages in June increased +0.2%, while consumer prices increased +0.3%, meaning real average hourly wages for non-managerial personnel decreased -0.1%. This results in a slight decline of real wages to 97.0% of their all time high in January 1973:
On a YoY basis, real average wages were up +1.5%, a decline from their recent peak growth of 1.9% YoY in February:
Updated through July, real aggregate wages – the total amount of real pay taken home by the middle and working classes – are up 28.7% from their October 2009 low:
For total wage growth, this expansion remains in third place, behind the 1960s and 1990s, among all post-World War 2 expansions; while the *pace* of wage growth has been the slowest except for the 2000s expansion.
Finally, two months ago I raised a concern that real aggregate wages had decelerated sharply this year, writing that “real aggregate wage growth has typically decelerated by 1/2 or more from its 12 month peak just at the onset of recessions, although there have been 3 false positives coincident with slowdowns.” Last month that concern disappeared. As of this month it re-appeared, as YoY growth has declined to 2.2% vs. 4.9% at the beginning of this year, and is actually -0.2% below its level in January:
Still, we have had two similar declines already during this expansion, so I would characterize th is metric as a yellow flag vs. a red flag at this point.