Wage Growth Hype
- MarketWatch: Economists call accelerating wages ‘best news’ in January jobs report
- Financial Times: Quicker wage growth adds heft to US recovery
- National Review: Wage Growth Accelerated in January
- Wall Street Journal: On Wage Growth, You Ain’t Seen Nothing Yet
There's a lot more hype if you look for it. The fact is, there is no solid evidence wage growth accelerated.
Wait a second, doesn't that lead chart show that wage growth is accelerating?
Yes it does. But it's the only chart. Let's look at other charts, also using BLS data.
Year-Over-Year Wage Growth Total Private vs. Production and Nonsupervisory Seasonally Adjusted
Some articles noted a difference between total private and nonsupervisory wage growth, but that's as deep as any analysis went.
For starters, when comparing year-over-year data it's best to use non-seasonally-adjusted numbers.
Second, the average workweek declined in January. That may have skewed the seasonal adjustments.
Third, averages are likely skewed by management wages.
Year-Over-Year Wage Growth Total Private vs. Production and Nonsupervisory Not Seasonally Adjusted
A comparison of January 2018 to 2017 unadjusted does not look quite so hot.
Year-Over-Year Nonsupervisory SA vs NSA
The Total series is new. It only dates to 2007. Production and nonsupervisory data dates back decades. Arguably that is another problem.
Note that in 2010 and prior years, SA and NSA comparisons tracked extremely well, often matching on the nose. Something happened since then.
Have seasonal adjustment gone haywire? Did Obamacare enter the picture?
Minimum Wage Hikes
The curious thing about these charts is that I expected an acceleration in wages. Why? Starting January 1, 2018, 18 states hiked minimum wages.
Even had all the charts shown wage acceleration, I would have asked: So what? Is it sustainable?
Hot Air Assumptions
All the reports jumped at one seasonally-adjusted number, ignoring the preponderance of data to the contrary.
Some now believe the economy is overheating.
The three things guaranteed to have overheated are stocks, junk bonds, and cryptocurrencies.
I do not know, nor does anyone else, but it will not take much for businesses to pull the plug on investment.
It's possible wage growth has accelerated or soon will, but despite the hype, evidence is scant at the moment.
This recovery is extremely long in the tooth. Overheating is likely to be the last thing on anyone's mind if the stock market collapse picks up steam.
Mike "Mish" Shedlock