According to the Bureau of Labor Statistics, workers’ inflation-adjusted hourly earnings (often called “real earnings”) increased 0.5% from October to November. In the simplest terms, workers got meaningful raises worth more than the amount prices increased. Real weekly earnings increased less, but that was because workers worked fewer hours, not because their wages did not rise.
Compared with last year, workers’ real hourly earnings are down 1.9%. This means workers’ earnings buy a little less today, but the effects are much smaller than the headline inflation numbers breathlessly reported in the media. Meanwhile, consumer prices grew only 0.1% from October to November, according to BLS, and 7.1% since last year. This latest report shows the continuation of a slowing trend in inflation.
For working families, the underlying trends are decidedly mixed. Gas prices fell, which is very good, but the prices for shelter and food rose, which is not. These are core family expenditures that can’t be put off until price increases slow further. Families may be able to wait to buy furniture. They likely cannot wait to buy milk.
There are several big unanswered questions for workers and the U.S. economy. Among the most important is whether workers’ wages will continue to rise as inflation falls. The answer will depend, in large part, on whether the Federal Reserve’s efforts to slow the economy results in hundreds of thousands or millions of workers losing their jobs. Higher unemployment likely would slow or stop wage increases because workers would lose power in the labor market. For example, workers would be less able to quit their jobs freely and find higher paying jobs.
We will have to keep a close watch on the unemployment claims reports, the JOLTS survey results, and the monthly jobs and unemployment report for signs that workers’ job prospects and power are getting receding.
