Real Wages Through November

If current nowcasts are accurate, we see erosion in some real wages, but not those for hospitality and leisure. And not even for aggregate if one uses the PCE deflator.

Figure 1 shows wages deflated into 2020$ using the CPI.

Figure 1: Average hourly earnings of private sector nonsupervisory and production workers (black), manufacturing (chartreuse), leisure and hospitality services (red), all in 2020$/hour, s.a., on a log scale. Deflated using CPI, November 2021 observation using Cleveland Fed nowcast of 12/3. NBER defined recession dates peak-to-trough shaded gray. Source: BLS, Cleveland Fed, NBER, and author’s calculations.

It’s hard to see how these levels compare to 2020M02 on this scale, so in Figure 2, I normalize to the NBER peak levels.

Figure 2: Average hourly earnings of private sector nonsupervisory and production workers (black), manufacturing (chartreuse), leisure and hospitality services (red), all in 2020$/hour,  in logs 2020M02=0. Deflated using CPI, November 2021 observation using Cleveland Fed nowcast of 12/3. NBER defined recession dates peak-to-trough shaded gray. Source: BLS, Cleveland Fed, NBER, and author’s calculations.

So real wages are above 2020M02 levels in the cases of overall and manufacturing, and very much so leisure and hospitality services (which are 5.2% above).

Note one’s view of what’s happening to total average wages depends on the deflator.

Figure 3: Average hourly earnings of private sector nonsupervisory and production workers deflated by CPI (black), by personal consumption expenditure deflator (teal), all in 2020$/hour, s.a., on a log scale. November 2021 observation using Cleveland Fed nowcast of 12/3. NBER defined recession dates peak-to-trough shaded gray. Source: BLS, Cleveland Fed, NBER, and author’s calculations.

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.