The Mystery Of America's Missing Wage Growth Has Been Solved

Tyler Durden's picture

One of the biggest conundrums, one that has profound monetary policy implications, and that has been stumping the Fed for the past year is how can it be possible that with 5.5% unemployment there is virtually no wage growth. The mystery only deepens when the Fed listens to so-called economist experts who tell it wage growth is imminent, if not here already, and it is merely not being captured by the various data series. Friday's jobs data merely confirmed that since the Lehman crash there has been virtually no real wage growth, as the increase in nominal average hourly earnings is right on top of the Fed's inflation target, instead of where Yellen would like to see it: somewhere in the vicinity of 4%.


And yet, when sophisticated, erudite pundits, usually from a paid leadership position, look at the data, they say wages are growing.

How is that possible?

Actually, the mystery only deepens when one looks not at the wages for the set of All Employees as shown above, but for the 80% or so classified by the BLS as "production and non-supervisory employees" who "account for approximately four-fifths of the total employment on private nonfarm payrolls." The Bureau of Labor Statistics defines them as follows:

Production and related employees include working supervisors and all nonsupervisory employees (including group leaders and trainees) engaged in fabricating, processing, assembling, inspecting, receiving, storing, handling, packing, warehousing, shipping, trucking, hauling, maintenance, repair, janitorial, guard services, product development, auxiliary production for plant's own use (for example, power plant), recordkeeping, and other services closely associated with the above production operations. 


Nonsupervisory employees include  those individuals in private, service-providing industries who are not above the working-supervisor level. This group includes individuals such as office and clerical workers, repairers, salespersons, operators, drivers, physicians, lawyers, accountants, nurses, social workers, research aides, teachers, drafters, photographers, beauticians, musicians, restaurant workers, custodial workers, attendants, line installers and repairers, laborers, janitors, guards, and other employees at similar occupational levels whose services are closely associated with those of the employees listed.

The BLS adds that "these groups account for approximately four-fifths of the total employment on private nonfarm payrolls." The remainder is the opposite: those which the LA Times defines as "primarily employed to direct, supervise, or plan the work of others."

In other words "working-supervisors", bosses, and other job "leaders."

The important math: production and non-supervisory employees, those not in leadership positions, represent 80% of the employed labor force. This is important when looking at the next chart which show the annual increases in hourly earnings just for production and nonsupervisory employees.

It is as this point that we ask that all economists avert their eyes, because it gets ugly:


As the BLS reports, not only is the annual wage growth of 80% of the work force not growing, but it is in fact collapsing to the lowest levels since the Lehman crisis!

But if the wages of the non-working supervisory 80% of the labor population are tumbling while all wages are flat that must mean that the wages of America's supervisors, aka "bosses" are...


The chart below shows what the implied annual change in supervisor hourly earnings has been since the start of the second Great Depression. Note the recent differences with the chart immediately above.



And there, ladies and gentlemen, is your soaring wage growth: all of it going straight into the pockets of those lucky 20% of America's workers who are there to give orders, to wear business suits, and to sound important.

Yes - wages are growing, for those who least need said wage growth, the "people in charge."

In other words, precisely all those economists who day after day repeat that, damn what reality says, wages are rising.

Well, guess what: they are absolutely right... when referring to their own wages! It is the small matter of everyone else's wages that they are dead wrong about.

So the next time anyone asks why there is no broad-based pick up in consumer retail spending across the entire population, just show them the above charts.

And with that, the mysterious case of America's missing wage growth is now closed.

Source: BLS, St. Louis Fed

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Thirst Mutilator's picture

I'd like to see a QE1, QE2, QE3 timetable superimposed on that.

I MISS KUDLOW's picture

This is my final post on zero hedge after six years,,,,3 different names after being kicked off twice I love u all,,,,the end is herrrreeeeee

Thirst Mutilator's picture

Well, since you're leaving... Tell us who you WERE... Otherwise we'll be stuck debating "I feel fat" emoticons & other important subjects.

Ness.'s picture

I'll miss each of you guys.  Hi Tylers!!   But I got a feelin' I'll soon be reading your posts again... 

Sum [where] over the Reign {beau}... 


NoDebt's picture

Vaya con dios, Mr. Kudlow.  Sorry to see you go.  Many have taken the plunge, some I've stayed in touch with.  They all go through withdrawal symptoms for a few weeks, but report their lives are better than ever after that.

Now... I gotta get to bed.  I don't want to be late to work tomorrow as the new shift supervisor at the local McDonalds.


Stuck on Zero's picture

I have a question for ZHers.  If there are 120 million workers in the United States earning $35K average then the total wages amount to ~$4.2T.  A huge chunk of that is paid out in taxes. Say that leaves the total take-home after taxes and government imposed spending of $3T.  Now where in hell do we get a $16T GDP and where does government get off spending more money than all Americans earn?


Four chan's picture

we shipped wage inflation to slave nations years ago and its never coming back this is the futility of the feds trillions of dollars actions. 

Save_America1st's picture

This is totally happening at my company.  I'm in IT Engineering which is pretty high level stuff here...yet our so-called "leadership" at the Director and above levels all the way to our VP and CIO are extremely inexperienced and incompetent. 

They have no clue what we really do because they've never done it themselves.  They're just a bunch of suits who make very poor decisions.

Yet they're all making extremely high 6 figures and our company has announced this year that salaried employees will not be getting their annual 10% bonuses and will only be getting very minimal raises from between 1% and 3%.

The upper management is exempt from this penalty however, so they will all be getting taken care of very well as usual.  The "folks" around here are not pleased to say the least.  I sense a mutiny comin'.  haha

smithcreek's picture

While I'm sure a lot of QE money sloshing around is going to people whose compensation far exceeds their contribution, the problem here is not that everyone in any kind of supervisory role is being overpaid, it's a problem with the lack of skills of the bottom 80% due to poor education of our own population and massive immigration.  Anyone worth a shit has to be paid more to supervise all the morons.

NihilistZero's picture

I wish cunts like you would choke on this bullshit argument. The bottom 80% are smarter and more skilled than they've ever been. Not everyone can or should be a software engineer. Until the destruction of our currency manual labor was done with pride and rewarded in this Country. The ONLY fucking reason a fry cook can't make a living wage in the free market is because capital reaps the benefits of decades of inflation. Highly skilled/educated labor breaks even. Everyone else gets fucked.

The next cocksucker who denegrates a guy who works hard with his hands, on his feet, all day needs ask themselves who dividends,bonuses,etc are up 1000's of percents while working folks rely on food stamps.

Hugh_Jorgan's picture

Being smart is a requirement but not the only one. If you can't think for yourself or reliably get yourself up off the dime you are probably just an annoyance to those around you. The problem isn't with the upper 20% or the bottom 80%. The problem is people, they screw up wherever they are. Only 5% of the population is "capable" of doing anything but following someone else's lead.

smithcreek's picture

Oh, I see, you break out the word cunts.  You win I guess.  Keep living in your world.  I'm sure it gives you solace.  The reason a fry cook can't make a living wage is because any moron with no education or non-english speaking immigrant can be a fry cook.  Put something in the deep fryer, take it out.  That was tough.  I work for myself, with both hands and mind.  Self-employed and an expert in my niche market for 15 years.  Is the system unfair?  Sure as shit yeah and getting worse, but blaming the top 20% when it's far fewer than that who have the opprotunity to game the system is stupid.

maskone909's picture

its not what you know, its who you know.

joe bidens kid

every successful actor in hollywood is in one way or another, related to some producer or comes from an acting family

athletes kids- too many to name, many suck eg luke walton

healthcare- i cant tell you how many good nurses are passed up for someones kid

longshoremen- they are practically all related



NihilistZero's picture

The reason a fry cook can't make a living wage is because any moron with no education or non-english speaking immigrant can be a fry cook. 

In typical Atlas Shrugger fashion you claim some personal/ethical superiority where none exists.  You saw my Cunt and raised me a, which is laughable as I'm anything but a progressive.  But let me go all in and call you a solipsistic, narcissistic asshhole with ZERO understanding of how international capital and the banking cartel have destroyed working people's standard of living.  In a world of honest money, where investors took their losses and risk premiums reflected that, where the costs of RE were not engineered by subsidized loans and preferred access to capital by specuvestors, etc a fry cook could indeed afford an honest living and the billionaires of this world would not and could not exist as they do now.  Government and the insipid banking industry that controls it is SOLEY responsible for the working mans exponential decline in standard of living over the last 30-40 years.

So fuck you and all your condescending ilk.

TheRedScourge's picture

If the people cry out for a $15/hr minimum wage while nothing else is changed, you will get two things:


- Large-scale mechanization of all $15/hr jobs

- Inflation


The 19th and 20th centuries were historical oddities. Before then, there was far more income inequality than even today. Be thankful for what you've got, it's not going to get any better on its own, and you sound more about complaining than doing something to make things better for yourself. Even without the financial manipulation done these days, fry cooks could not earn a living wage today, because the demand for labor of all sorts has absolutely tanked since the good ol days of the 50s, when things still needed to be done by hand. Things would be better without the manipulation, sure, but not a whole lot.


if the government stops hiding all the covert theft they do, it will be clear that they spend about 75% of GDP each year. Unless this changes, there will be NO way to pay fry cooks $15/hr, whether or not all the financial types suddenly decide to stop manipulating everything. But they won't stop manipulating everything, because the government makes them do it.


Again, the relative prosperity and income equality of the 18th and 19th centuries are a historical oddity. Almost all of the things which made that possible and sustainable have evaporated. Things are simply reverting to the mean.

TheRedScourge's picture

The reason that the management folks make hundreds of thousands to millions while the fry cooks make tens of thousands is the same reason that there's no money in digging holes and filling them back up again (unless of course you're also inserting coffins perhaps). Wages are just prices of particular types of labor, and certain types are more in demand than others.

The only reason there's such thing as any wage is that there are goods that people are willing to pay for. The problem is there's way too many fry cooks than there is demand for fry cooks, so the price of labor adjusts itself downward. Sure, there's tampering in the markets, but most of the time, the majority of dollars changing hands in the REAL economy are only manipulated a few percent at any one time.


So, the argument that everyone can have a living wage is bogus. It's a lovely sentiment, but people are only going to pay you what they want to pay you for, and they're always going to look for a better deal. You probably do the same thing every time you go to the grocery story.

rccalhoun's picture

i was kicked off twice, too

probably get kicked off again for revealing that and now i use my real name

WTFMOFO's picture

My thoughts exactly.

I owned a small manufacturing company from 2000- 2011.  I never thought I'd need so many managers as I gave "the masses" a lot more credit than I ever should of in being responsible.....yeah right.  I'd say that 60-70% of society is FUBAR.   

Between pruduction employees smelling like weed (I don't begrudge anyone for smoking it, but don't get wasted and show up to work smelling like it or being high, do that shit after you clock out).  I even had 3 new employees that couldn't manage to get out of bed before 10:00 or 11:00 in the day and they were told that they had to show up at work between 8:00 and 9:00 (an hour "flex time" on showing up due to local traffic issues/parking lot).  

I literally had a conversation with one employee who had only worked for 3 days and then showed up late the next 3 days - like 4 hours late.  On the 3rd day of being late I told him that the next time he would be termintated.  The VERY NEXT DAY he called me at 1:00 in the day and begged for me not to fire him, said he had over slept.

Had another that was backing up the van to load up some stuff from  double doors vs the dock and wiped out the two doors (backed into them, they opened "out").  I had to replace the doors.  After talking to him about the issue and asking him to please pay attention the  next week he wiped out my doors again after I replaced them myself.

Had another employee that was trained for 8 hours on how to cut something....pretty much stack the product nice and even against to rails to square it all up so they are all cut the same dimensions then hit the button and cut them.  He actually came to me about 4 hours later and said "Boss the cutting machine us messed up as nothing is cut right".  I go back and check it out and it is working fine, he then looks at me and says "Oh, I forgot to stack them where they are squared up".   The idiot cut for 4 hours and $7500 worth of product (my cost) and runied it.

I HATE FUCKING IDIOTS and we sure have a lot of them out there.  I made a lot money when I was small (2-12 employees) and could control it.  When I went from 12 - 30 employees I pretty much only lost money do to so many fuck ups occuring in production and employees tearing up equipment.

I sold the place and have vowed never again to start a business where I need any more than 4-5 employees and just is not worth it.  


WTFMOFO's picture

Oh and lets not even mention the idiot that lost a finger.  3 production guys put all their brain power together and decided that instead of adjusting the equipment with it locked down and tagged out and by using the proper documented procedure, that it would be much better to adjust it while running.  They took off a safety cover, by-passed the safety switch, turned the maching on and one idiot stuck his hand back in to make an adjustment.....cost him a finger and me a nice audit and sent my workers comp through the roof.

After the smoke cleared it cost me about $15K...all because 3 idiots thought they could save 5 mins by adjusting the machine while running.


If anyone has not watched the movie "Extract" then they should, as it is a good representation of todays workforce.   The movie is funny as fuck...but it is a movie, when you live that shit day in and day out at your business then it's not so funny.





armageddon addahere's picture

Have you ever thought of keeping the good employees by say giving them an extra 25 cents an hour and firing the morons? Just a thought, from someone who worked on the line for years. There are good workers and bad workers. It always seemed like a good idea to keep the good ones and can the bad ones but management never figured that out. I didn't think they could tell the difference. They seemed to judge by criteria that had nothing to do with doing a good job.

WTFMOFO's picture

Sure did, the ones that could rise, rose, started them all out at $11.00 and hour in production, the good ones (3) were making $40K within a few years (2-3).

Now the fucked up ones done nothing but bitching because a few others were making that much after 2-3 years.  These fucking morons could not understand the entire premise behind why the other 3 were making nearly twice us much as they were all hell bent on making those 3 peoples life fucking miserable and trying to get out of any and all work.

When I sold the place the 3 "good emplpyees" got a nice fat paycheck "under the table" from me....the others, well let me say the current owners still deal with idiots though not the same that were workign for me.

The amount of so-called "Men" in today's world is unreal.  We have raised a bunch of pussies who have no clue in how to even change the oil in their car, cut their own fucking grass and maybe change a spark plug on a mower..I guess they are afraid of gettign their skinny jeans dirty.  Our society is fucked, all these young men do nothing but lay around the house, watch tv, get high and play video games.  It's not their fault, it is OUR fucking fault for raising them that way.


Everyonne wants a fucking job but nobody wants to work.

BKbroiler's picture

You and NihilistZero both have very good arguments, although on opposite sides.  I can relate to the incompetence of workers of my own, but at the same time think the spread between the lowest and highest paid employees is far too much.  I run a small real estate office.  My listings/admin makes half of what the agents make, and the agents make half of what I make.  Seems fair, keeps them happy, I do ok.  The problem with companies bigger than 10-12 people is the disassociation between employees that make them treat each other like shit.  That's why my office has no walls.

WTFMOFO's picture

You kow if I did not have to put 2 levels of management between me and the production employees I would have gladly used the money I spent on "babysitters" of men and gave them good pay raises if they could have shown some self responsibility, pride, and effort in their work....nope it was pretty much the mentality of "let's go to work and try to do nothing" I had to hire managers.

I was in the military for a few years - Same thing, I was a "model soldier" simply because I did the min that was required - 90% could not do that and it's not real difficult a task in learning how to kill people.

I was in R&D for Kodak, we came up with a product and hired 600 production folks over the period of 2-3 years - same thing all pretty much worthless and trying to "game" the system.

My internship (for college) was at a local steel mill - same thing only union and much worse - hell one guy decided that it would be cool to jump in the train start it up and drive it a few feet in front of the others - he hit another train (could not get stopped) at about 4 miles an hour and done $3 million worth of damage - guy got a week off un-paid as punishment!  The Union stepped in on his dumbass behalf.

Last I heard that ol steel mill went from 2000 full time employees down to around 200 - the rest of the work is sub contracted out so they don't have to deal with stupid employees, guess there are maybe 1500 sub contractors working there today.

Now don't get me wrong, there are some good folks out there, but they are not by any stretch of the imagination remotely close to being a majority.

I started my business literally from my garage with $60K investment, a year later I was in 5000 sqft rental and had 4 employees.  I was still working full time at my engineering gig and fulltime (+all weekends) at my business.  I hit $2.5 million worth of revenue in about 5 years with NO DEBT and a 20% net proft margin....I paid myself $80K a year and had employees making $50K, the rest of the money went back into the company for expansion/growth.  Most I ever paid myself was $200K as I put it all back into the business.  By the time I decided to sell the place I was making $50K a year and was losing close to $200K in having major human fucking problems in production.   Luckily I had a ton of equity in the business and owned a 125K sq t facility.

Only 3-4 folks that I hired over that time frame could add value....period.  Those folks got a visit from me after I sold and were given a nice chunk of change out of my pocket in cash for helping me along the way.  I did not have to give them anything and they wwere not expecting it, but I did at least give them a years worth of pay in cash for actually being good employees and helping along the way vs hendering.  The rest:  If I seen some of them right now broken down on the side of the road needing help, I'd honk,  wave and keep on driving....fuck um.

















Abbie Normal's picture

Saw a stamping machine that required the operator to hold onto two handles with both hands before it would do its job.  That was the only way to keep the operator's hands out of the work area and not get them stamped.  It's so difficult to make anything foolproof because fools are so ingenious.


thamnosma's picture

I believe your experience reflects the larger societal reality.  Our friend Nihilist is dreaming of a long gone America where people took pride in their work and themselves.

armageddon addahere's picture

I used to take pride in my work until I found out what that gets you. Now I want to be a useless parasite in other words, a success.

Orwell was right's picture

 Save America.   I agree 110% with your post.  I left IT after 30 years in a very large corporation.     I was one of the Director/AVP group, but I was one of only two who actually started out as grunt programmers "back in the day".   The rest of the crew were slick haired, acronym spouting idiots who had no idea what the inside of a server looked like, or what it takes to code.    Worst of all, these slick haired wannabes, had NO empathy for the staff that actually DID the work.

Hugh_Jorgan's picture

I was in the same situation two years ago, 12 years for a firm moving that was continuously creeping away from both sanity and competence. I walked away haven't regretted it for a minute. "Job security" is an illusion, especially if the company that is mis-managed badly enough. You can change anything you want, if you make it your primary focus.

LooseLee's picture

Yeah. Same as it ever was in Pinko Fascist Commieland. Its not what you know but who you know and often, blow....Sad state we humans have created in our lust for position, power, and $$$...

Usurious's picture
Usurious (not verified) Stuck on Zero Mar 11, 2015 11:12 PM


and how much is payed out in USURY to parasitic banksters?

BlindMonkey's picture

"The sure is a nice economy you got there. It would be a shame if something happened to it." That is banker speak for: Fuck you. The globe would implode without you peons paying your vig.

ThirteenthFloor's picture

Most of the 16T $ in GDP is shuffling paper actually. Such as stock transactions, etc. that's America the paper shufflers.

thamnosma's picture

But, but, the Fed just released this:


Federal Reserve: US household net worth hits record $83 trillion in 4th quarter of 2014 - @CNBCnow
socalbeach's picture

The $16T GDP is normally calclated as the sum of consumption, business investment, government purchases, and net exports.

But GDP is also equal to national income plus indirect business taxes (like sales tax) plus depreciation.  And national income includes not only wages, but also rental income, interest income, and corporate profits. 

So wages are just a small part of GDP.

Lolitsa's picture

You, get outta here with your simple math and all. Be gone with you! Things are just grand, I'll have you know!

gatorengineer's picture

Your assumption is unfounded, you make 35k, you only pay social security, and maybe around 5% in federal.  If you have a family you are likely getting Food Stamps, Section 8, Earned Income Tax Credit, etc....  at the end you probably are a net taker.

Ghordius's picture

first, whenever a state has a budget deficit, this has to be financed by fresh debt. well, this excess state spending counts towards GDP, too

second, not all income is paid in wages. if you have income from stocks rising, it's not wages, is it? and so on, up to companies, foreign income, etc

this list is a bit longer then that, but those two points already cover some of it. GDP is a useful number, but a terrible one to worship

Kayman's picture

Stuck on Zero

  GDP is a contrived number, supposedly representing the value of goods and services created by the economy. Remove all parasitical numbers from GDP- government, stock and bond flipping, insurance, real estate (mainly flipping existing assets) and GDP rapidly falls to your numbers.

Private sector employees ultimately carry the can for the rest of the economy and our bought-and-paid-for politicians don't have a clue that that is the crux of the problem.  You can't have the off-shoring of all your productive jobs and have a real economy. It's a slow death from the cancer of ignorance.

And the so-called "strength" of the USD is simply a reflection of the weakness of all other currencies.

Imagine an economy that is so strong that a 1/4% increase in the Fed rate brings the economy to it's knees.

koncaswatch's picture

Perfect, succinct, cogent answer to Stuck on Zero's question.

+1 especially for the observation in your last sentence.

Leknam's picture

Right question. But numbers have to be right ie; average wages/salaries ?  

Also it's not a dollar for dollar zero sum game. Each dollar is spent or invested

more than once, Money Velocity .

Monetas's picture

I sure miss Do Chen Roller Bearing .... did he fall down a Peruvian mine shaft .... did Sendero Luminoso get him .... I wanted to give him a business tip .... Peru is a mountainous country .... expand your product line to include .... clutch and .... BRAKE PARTS !!!

davidalan1's picture

You had me at "Kudlow" omg, too funny...dont leave you attention whore...

Enough Already's picture

I loved Kudow. He was a cheer-leader with his constant "green shoots" but so much better than Kramer.


Why does that idiot still have a show?

divingengineer's picture

Showmanship, my boy!


Gavrikon's picture

He's sooooooooooooooooooooooo gay!!!!

HopefulCynical's picture

Why does that idiot still have a show?

He used to work for Goldman Sachs. He's there to lead the sheeple into the Wall Street slaughterhouse. The term is Judas Goat. Kramer's not going anywhere.