Tags: Hourly Wages | Pay | Economy | Jobs

Hourly Wages Don't Tell Whole Story as Other US Index Gains

Friday, 07 Nov 2014 06:24 PM

Americans who took their economic discontent to the polls this week might find some solace in a measure of income that is starting to show signs of life.

The Labor Department’s aggregate weekly payrolls index, which takes into account hours, earnings and employment, was up 4.8 percent in the 12 months through October, marking the strongest gain since March 2012, the monthly employment report showed. That was more than twice as large as the 2 percent increase in the oft-cited average hourly earnings figure.

Since the length of the workweek and the number of people being hired are just as important as how much employees are getting paid per hour, the more encompassing gauge shouldn’t be given short shrift, said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. In fact, it has a 90 percent correlation with consumer spending during this economic expansion, he said.

“The hourly rate alone tells you nothing about the ability of the consumer to spend and is really a much less useful metric than what the masses give it credit for,” Porcelli, a former analyst at the Federal Reserve Bank of New York wrote in a research note. “It doesn’t matter whether the hourly pay rate is stagnant, as long as aggregate hours are accelerating smartly.”

The improvement is even more pronounced when supervisors are excluded. The index of aggregate weekly payrolls of production and non-supervisory employees rose 5.1 percent from October 2013. The average year-over-year gain in the last six months is 5.2 percent, the strongest since December 2007, when the last recession began.

Hourly Earnings

The report showed average earnings for all workers rose 0.1 percent in October from the prior month. The increase from a year earlier was less than the 2.1 percent median forecast in a Bloomberg survey. Before the recession began in December 2007, the year-over-year measure of pay was up 3.1 percent.

Such wage gains partly explain Americans’ dim perceptions of the economy, which helped Republicans capture control of the Senate from Democrats and solidify their majority in the U.S. House during the midterm elections this week. The results ensured that the GOP will control both chambers of Congress for the remainder of President Barack Obama’s term.

Other recent data corroborate the pickup. Civilian wages and salaries rose 0.8 percent in the third quarter from the prior three months, the biggest gain since mid-2008, the Labor Department’s employment cost index showed last week. That followed a 0.6 percent advance from April through June.

‘Mixed Evidence’

“We’re seeing some mixed evidence” on wage growth, said Laura Rosner, a U.S. economist at BNP Paribas in New York and a former New York Fed researcher. The ECI data were “encouraging,” while “for average hourly earnings, we haven’t seen really that improvement.”

The report showed that employers added 214,000 workers to payrolls in October after a 256,000 advance the prior month that was more than initially estimated. The jobless rate fell to 5.8 percent even as more people entered the labor force, boosting the share of the population working to the most in five years.

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Americans who took their economic discontent to the polls this week might find some solace in a measure of income that is starting to show signs of life.The Labor Department's aggregate weekly payrolls index, which takes into account hours, earnings and employment, was up...
Hourly Wages, Pay, Economy, Jobs
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2014-24-07
Friday, 07 Nov 2014 06:24 PM
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