Tuesday, August 10, 2004

Yet more news from the Bureau of Labor Statistics that real wages have at best stagnated.
Hourly compensation in the nonfarm business sector increased 4.9 percent in the second quarter of 2004, up from the 4.0-percent rise one quarter earlier. When the rise in consumer prices is taken into account, real hourly compensation rose 0.1 percent in the second quarter of 2004 and 0.3 percent in the first quarter.
These figures are, of course, annualized. Thus per the Major Sector Productivity and Costs program, real compensation per hour in the second quarter was virtually unchanged from first quarter (+0.025%) and up barely from 2003:IV (+0.075%).

The Employment Cost Index tells a less rosy story, as if that was rosy. Let's tell it without the annualizing obfuscation. Per the ECI, seasonally-adjusted real compensation is changed -0.25% over last 6 months. Since hours are up +0.7% since 2003:IV, the disparity between ECI and Productivity and Costs must be due to differing measurement methods.

Note also that the rise in compensation (if you believe there is one) is all due to rising benefits. Money that workers can actually get their hands on -- real wages and salaries -- is changed -1.1% in just six months!

Although unit labor costs for the quarter rose at an annualized +1.9% clip, the fastest since 2002:II, capital has no cause for complaint. Unit labor costs fell all throughout 2003 and are now only at their average 2002 level. With inflation eating away the real impact of these costs, no worries! And in light of the incredible profits that capital is making (profits for the S&P 500 firms were up some 27% in the second quarter), it is truly obscene when Reuters says
Because labor represents the biggest production expense for businesses, the rise in unit labor costs suggests worker compensation could begin eroding profits, unless firms can raise their selling prices.
O, poor capitalists! We here at the Globblog weep for you.


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