Spotlight on Hourly Earnings: Inflationary? Opinions Vary

-edited

The BLS Jobs report showed a big jump in month-over-month hourly earnings. Some scream inflation, others say it's benign

This morning I noted Another Wild Jobs Report: Payroll Employment Rose a Disappointing 20,000.

The month-over-month jump in hourly earnings are worth a closer inspection.

Hours and Wages

Average weekly hours of all private employees fell 0.1 hour to 34.4 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers fell 0.1 hours to 40.7 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.11 to $27.66. That a 0.51% gain. Average hourly earnings of private service-providing employees rose $0.11 to $27.43, a gain of 0.40%. Average hourly earnings of manufacturers rose $0.12 to $27.38, a gain of 0.44%.

Average hourly earnings of Production and Supervisory Workersrose $0.08 to $23.18. That's a 0.35% gain. Average hourly earnings of private service-providing employees rose $0.10 to $22.92, a gain of 0.44%. Average hourly earnings of manufacturers rose $0.06 to $21.90, a gain of 0.27%

Year-Over-Year Wage Growth

  • All Private Nonfarm from $26.75 to $27.66, a gain of 3.4%
  • All production and supervisory from $22.40 to $23.18, a gain of 3.5%.

Monthly swings can be wide, so it's best to look at trends in year-over-year growth, as the lead-chart does. Here is a closer look.

Year-Over-Year Wage Growth vs CPI 2013-2019

Starting August 2018, the year-over-year hourly earnings growth has been over 3% every month but October 2018. That's 6 out of seven months.

Phillips Curve

The Phillips Curve clowns will no doubt be singing ah ha! See!

Dismiss the thought. The Phillips Curve is random. It appears to work about 50% of the time. That makes it useless.

Opinion 1: Inflation

Opinion 2: Inflation

Opinion 3: Inflation

Opinion 4: Stagflation

Opinion 5: Benign

Opinion 6: Mine

I don't know, and they don't either.

I could not produce the charts of Lakshman Achuthan in Fred. But whether or not his charts are meaningful, I think Achuthan is on the right track.

Asset bubble bursting events are deflationary. The demographic cycle is deflationary. The global slowdown, especially in China and Europe is deflationary. The huge jump in retail store closings is deflationary. The auto and housing trends are deflationary.

Finally, Trump's tax cut stimulus is about over already. Some of these wage gains are related.

If one believes we are late cycle and a recession is coming bet on Achuthan.

Mike "Mish" Shedlock

Comments (16)
No. 1-8
Bam_Man
Bam_Man

Didn't we already see how this plays out with whole Foods? Bezos gave everyone a $2-$3/hour raise to $15/hr. and then cut their hours by 25%. So the employees are now expected to do 28 hours of work in 20 hours. I don't see how this is inflationary.

JonSellers
JonSellers

Wage costs are just one input to overall production costs, and often not the biggest. And wage growth is only inflationary if a business has the power to increase prices. So if a business has the power to increase prices, why wouldn't they have already? They hate profits?

Let's see a chart of productivity growth over the last 30 years relative to wage growth and see how close we are to an inflationary burst.

abend237-04
abend237-04

I clearly remember the wage/price spiral of the 70s and the things that lit the fuse under the inflation rocket: Guns and butter, compliments of Lyndon Johnson's Great Society funding and fighting the Vietnam war on credit. Come budgeting time, every HR rep through the door had the latest labor rates from US cities and was absolutely adamant that we had to 'pay to play,' and In a closed labor market, we did.

It's different this time. The labor market lists have been updated and have strange names like Vietnam, Cambodia, India, etc. listed on them thanks to globalization. In fact, IBM now has more employees in Asia than north America. They'll all be there if American wage demands become non-competitive.

nic9075
nic9075

No ones hours were cut. Whole Foods like every other retailer is desperate for workers. Most are being Hired as full time hourly workers with full benefits and time and half overtime after 40 hours

AWC
AWC

My bet, as long as the Fiat Money system lasts, is on constant dollar devaluation. In my view, the controllers and producers of Fiat will see to it deflation (An increase in purchasing power of their funny bucks) will not take place for any longer than it takes to fire up the helicopters.