Labor Productivity Up, Real Hourly Compensation Down

Mike Mish Shedlock

Labor productivity is inching along. Real wages are not keeping up.

Here's a Tweet this morning that caught my attention, along with my response.

I suspect the comment from Sven was sarcastic, but I am not positive.

Real Wages

Inquiring minds may be wondering how real wages are doing. Today's report from the BLS on Productivity and Costs sheds some light.


Congratulations nonfarm business workers. On average, you made 0.2% more than you did a year ago. Of course, that assumes you believe the BLS CPI inflation stats.

If you worked in nondurable manufacturing, oops. You were down 2.4% from last quarter and 1.5% from a year ago.

Fourth Quarter 2017 Stats

Clean Sweep

In the fourth quarter it was a clean sweep. Workers lost money no matter where they worked despite rising productivity.

If one believes the BLS understates the CPI, the numbers are even worse.

Average Wages

Bear in mind these numbers are averages and averages make things look far better than they really are. A small percentage of workers getting big raises skew the numbers.

Median Wages

Median wages, only available on a 1.5 to 2.0 year lag, tell the real story. The last data on real median wages is from May of 2016.

Real median wages declined in seven out of the last eleven years!

For discussion, please see How the Fed's Inflation Policies Crucify Workers in Pictures.

Also note that Consumers Expect No Improvement in Spending, Income, or Inflation.

Lawrence Yun, the National Association or Realtors' (NAR) chief economist, Blames Inventory, Weather as Pending Home Sales Tumble 3% Year-Over-Year.

Real Story

The above charts tell the real story: Consumers are tapped out and wages are not keeping up with expenses.

Amusingly, economists wonder why consumer spending is weakening.

Mike "Mish" Shedlock

Comments (6)
No. 1-6

Maybe the BLS CPI should be re-acronym'd to BS CPI... :)


The best way to fix this is to make all states the so-called right to work states. That way most people will have to work for peanuts but their wages will finally (and mysteriously) rise! If you believe in the free-market mumbo jumbo that is.


Labor Productivity Up, Real Hourly Compensation Down... Increased automation?


Meanwhile, homes under $300,000 are going away in Denver: (might be/probably paywalled).
From the article
<i>"To qualify for a 30-year mortgage on a $400,000 home, assuming a 20 percent down payment, a household would need to earn around $85,500, according to

The median househould income in metro Denver is $73,271."</i>


After over 11 months without a contract and 23 months without a pay increase, next Friday my medical laboratory (union) finally gets to vote on a new contract agreement. So much for healthcare unions. I will take free market and right to work over subdued wages and nitpicking union demands anyday. The union has raked in money and given me, on average 1.5% increases annually for 8 years. Before being union I was getting a yearly bonus as well as double step increases due to being a good worker. Unions level the field so only below par workers come out ahead. I expect I will get a “healthy” 2% increase, or if lucky, maybe 3%. Let’s get this party started!


Do high-wage Baby Boomers retiring or low-wage H1B/Green-Card replacement employees have any statistically significant impact on these numbers, or are those populations too small to make a difference?

Global Economics