Recent data regarding the national economy have been generally upbeat. Home building activity remains above the one million unit per year rate. The nation has been adding more than 200,000 jobs per month recently, and stock valuations remain high. But while certain aspects of the economy are improving, worker pay isn’t, at least not to the same extent.
Writer Neil Irwin points out that average hourly earnings for private sector American workers rose approximately 49 cents per hour over the past year, to 24 dollars and 38 cents in May. That pay increase was insufficient to cover inflation, however. Once one factors in inflation, which totaled 2.1 percent over the past year, hourly worker pay declined 0.1 percent over the past 12 months.
There are many associated implications. For instance, the lack of sustained progress in wage growth will continue to limit consumer confidence, which in turn suggests that consumer spending will remain constrained. Moreover, these figures suggest that Federal Reserve officials who believe that wage pressures are mounting should think twice before they seek to slow down the economy by raising key interest rates.
