Sep 5, 2018

White House claims it solved the wage growth puzzle

Data: Council of Economic Advisers; Note: CEA calculation is after tax and adjusts for demographics of workforce, work benefits and a different measure of inflation. "CPI adj." is only adjusted for the Consumer Price Index, used by Bureau of Labor Statistics; Chart: Andrew Witherspoon/Axios

White House economists believe wage growth has climbed at a faster rate than what's been previously calculated, according to new data released Wednesday.

Why it matters: Unemployment is nearing a 20-year low, but wage growth has been meek — 0.1% in the second quarter from a year earlier, according to the Bureau of Labor Statistics — leaving economists scratching their heads. But the White House's new calculations put that wage growth figure at 1.4%.

The White House argues that the traditional methodology doesn't adjust for lower-skilled or younger workers coming into the workforce (who typically have lower wages) and would-be retirees leaving the workforce (who usually are paid more.)

  • The White House said this measure should account for other ways workers are compensated, including bonuses, paid time off, and health benefits.
  • Officials also said a different measure of inflation should be used in wage growth calculation.
  • Top Trump economic advisor Kevin Hassett said in a media call that this effort is not a criticism of the data released by the Bureau of Labor Statistics, which said it could not comment.

The bottom line: Most economists are still likely to cite the BLS's traditional measures of wage growth but, some say, the White House asks an appropriate question about how income is measured.

  • "While you can say the motivation [for the measurement adjustment] was political, what comes out at the other end is a legitimate issues regarding mis-measurements," said Steve Blitz, an economist at TS Lombard, a research firm.
  • "They are not the first administration to do this and they are certainly not the last," Blitz added, citing the Obama and Nixon years.

Go deeper

Unemployment fell to 50-year low in 2019 but wages stagnated

Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

Friday's jobs report missed expectations, but still delivered solid numbers, showing the U.S. economy added well over 100,000 jobs and the unemployment rate remained near a 50-year low.

The big picture: BLS reported that the number of people who were employed part time but would rather be full-time employees declined by 507,000 over the year.

Wages for typical workers are rising at their fastest rate in a decade

Construction workers holding a rally in the Bronx. Photo: Erik McGregor/LightRocket via Getty Images

Wages for nonsupervisory employees — who make up 82% of the workforce — are rising at the fastest rate in more than a decade, the Wall Street Journal reports.

Why it matters: It indicates that the benefits of a tightening labor market and a time of historically low unemployment rates are finally being passed along to most workers.

Go deeperArrowDec 27, 2019

U.S. economy adds 145,000 jobs in final report of 2019

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. economy added 145,000 jobs in December, the government said on Friday, below economists’ expectations of 160,000. The unemployment rate held at 3.5% — a 50-year low — while wages grew 2.9% from a year earlier, the smallest gain since July 2018.

Why it matters: The U.S. job market held up in the final month of 2019, but heads into the election year with a slowing pace of job creation and wage growth.

Go deeperArrowJan 10, 2020