Thursday, July 29, 2004

There's a funny headline from the wire services today. AP's puts it this way: "American Wages, Benefits Rise Moderately".
Wages and benefits for U.S. workers rose a moderate 0.9 percent in the April-June quarter this year, down slightly from the previous quarter's increase, as price pressures for benefits like health insurance eased significantly.

The Labor Department reported Thursday that the 0.9 percent rise in wages and benefits in the second quarter followed a 1.1 percent increase in the January-March quarter. It was the smallest quarterly increase since a 0.8 percent rise in the final quarter of last year.
This is the quarterly data on the Employment Cost Index. The propaganda benefit of the ECI over the real wages data is that you have to do some work to turn the ECI into a real inflation-adjusted figure, whereas the BLS does it for you re wages. Factoring in inflation tells a rather different story.

Whereas nominal wages and benefits rose 0.9% for the quarter, real compensation (deflated by CPI) actually fell 0.5%, the first time since 2003:II. More important and telling are the wage and salary data for the quarter. Nominally they are up 0.6% for the quarter. With inflation factored in, real wages and salaries are down 0.8%. This is the second quarter in a row that real wage and salary component of the ECI fell, following -0.3% in 2004:I.

On the annual basis the government loves so much when reporting GDP figures, real wages and salaries are down 2.1% for the first half of 2004. Now that's a headline worth reading.

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