Hourly earnings: a longer view, but still weak

 It wouldn’t hurt to have some longer-term perspective on what’s been happening with average hourly earnings as the labor market tightens. In a couple of words: not much.

Graphed below is a history of the yearly growth in nominal average hourly earnings (AHE)—since 1965 for production/nonsupervisory workers and since 2007 for all workers. (The all-worker series is fairly short, making long-term comparisons impossible, but it does track the production worker series pretty well.) Note that both series are very close to their historical lows.

  AHE-yty

For the year ending in February 2015, AHE for production workers are up 1.6%—half the 3.1% 1983–2015 average. That figure was a little lower in 2012, but it’s quite close to three earlier troughs. In May 2014, less than a year ago, the annual gain was 2.4%. So we’re down 0.8 on wage gains—coincidentally, exactly what the decline in unemployment has been over the same period (6.3% to 5.5%). Wages aren’t usually thought of as decelerating as the labor market tightens, but that’s what’s happened.

The slowdown in all-worker AHE is less dramatic, but February’s 2.0% annual gain is below the 2.4% average for the entire series, and 2014’s 2.1%—and considerably below the 2008–2009 average of 2.9%, when the economy was falling apart. 

So, really, weak wage growth looks to be more of a macroeconomic problem now than wage pressures.