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Confused Economists Ponder Missing Wage Growth "Mystery"

Tyler Durden's picture




 

On Thursday, in “‘Where’s My Raise?’: American Workers Suddenly Realize The ‘Recovery’ Isn’t Real”, we once more took up the topic of America’s missing wage growth. 

The idea that unemployment is trending lower while wage growth remains stagnant is perplexing to central bankers and although we solved this apparent mystery some three months ago, we understand that for PhD economists, it takes a while for things to sink in, which is why we're happy to explain once more that there is in fact wage growth in America — just not for 80% of the workforce

We suspect this still hasn’t hit home for the central planner/ Ivory Tower crowd, but we’re at least encouraged to learn that Fed economists are thinking very “seriously” about this vexing problem and indeed, the WSJ has taken the time to lay out nine prevailing theories from some of the country’s ‘finest’ economic minds. 

Without further ado, here are some proposed explanations for non-existent wage growth in America, straight from your favorite Fed researchers:

1. The labor market simply hasn’t healed from the 2007-09 recession, according to Chicago Fed economists Daniel Aaronson and Andrew Jordan. 

 

2. Sluggish productivity growth and other long-term changes in the economy, such as workers’ declining labor share of overall national income, are restraining pay raises, according to Cleveland Fed economists Filppo Occhino and Timothy Stehulak. 

 

3. Companies were unable to cut pay during the recession and later compensated by withholding raises during the expansion, according to San Francisco Fed economists Mary C. Daly and Bart Hobijn.

 

4. The large number of part-time workers, including people who want full-time work but are stuck in part-time jobs, is weighing on wages, the Atlanta Fed said in its most recent annual report. 

 

5. Not enough people have been quitting their jobs, according to Chicago Fed economists R. Jason Faberman and Alejandro Justiniano. 

 

6. People who have left the formal workforce but still want a job are holding down pay because they might rejoin the pool of job seekers, according to Fed Board of Governors economist Christopher L. Smith.

 

7. A shift in the makeup of the U.S. labor market to include more low-wage jobs is a factor, but not a big one, according to Atlanta Fed economist Whitney Mancuso. 

 

8. The unemployment rate may not have fallen far enough yet to generate strong wage growth, Dallas Fed economists Anil Kumar and Pia Orrenius suggested. 

 

9. Wage data may not tell a clear story about the state of the labor market at all, according to Richmond Fed economists Marianna Kudlyak, Thomas A. Lubik and Karl Rhodes. 

So, in sum, the labor market may be stuck in a post-recession hangover, but it could also be that companies wanted to pay less during the downturn but couldn't (because workers are just looking for an excuse to quit during a quasi-Depression). Or, the demand for full-time work is so great that employers can afford to pay less (which directly contradicts suggestion number three), which is somehow compounded by not enough people quitting. Alternatively, wage growth could (somehow) be supressed by people who have given up looking for a job but who may decide to look later and although common sense suggests that more low-wage jobs may contribute to lower wage growth, that's probably not a "big" factor. Finally, it may be that unemployment simply hasn't fallen enough yet or, the data may just need to be double-adjusted. 

We have another suggestion: perhaps there never was a recovery in the first place and still-depressed global demand is curtailing consumption, profits, and investment.

But admitting that would be to admit that trillions in QE has been an abject failure. That's Keynesian heresy and is never to be spoken of again. 

 

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Fri, 06/05/2015 - 15:29 | 6167561 LawsofPhysics
LawsofPhysics's picture

LOL!!!! there is an excess supply of labor...

So now simple things such as the "laws" of supply and demand elude the "best and brightest"?!?!

LOL!!!  makes sense I guess sense money creation no longer requires any real collateral either.

when can we execute these fuckers already?

Fri, 06/05/2015 - 16:02 | 6167664 kchrisc
kchrisc's picture

"when can we execute these fuckers already?"

Need an Uber for guillotines.

"Your guillotine has been dispatched, and is on the way. It will be there in 5 minutes."

Liberty is a demand. Tyranny is submission..

 

There should be an app for that.

Fri, 06/05/2015 - 18:57 | 6167734 JuliaS
JuliaS's picture

Hearing Bernanke speak costs $400K. I bet we can get 400 pitchfork armed ZH'ers together, rent out a concert hall and donate $1K each for a chance to tell him to go fuck himself personally, before sending him to his Zionist forefathers.

We can go right through the speakers' list from few days ago and prioritize.

Takes only 250 willing ZH'ers to take care of Hillary. And obviously, the more people participate, the bigger the discount.

Fri, 06/05/2015 - 20:18 | 6168231 MonetaryApostate
MonetaryApostate's picture

Trickle down economics is a real mystery, I'm sure....  (Not)

Fri, 06/05/2015 - 16:22 | 6167715 joseJimenez
joseJimenez's picture

how about tomorrow morning? Does it work for you

Fri, 06/05/2015 - 19:08 | 6168062 sgt_doom
sgt_doom's picture

Most definitely there is an excess of labor --- it's called too many fuctards in the Federal Reserve System!

My fave:  6. People who have left the formal workforce but still want a job are holding down pay because they might rejoin the pool of job seekers, according to Fed Board of Governors economist Christopher L. Smith.

(I'm thinking this Smith douchetard's education consisted of watching all of Oprah's shows?)

Geez, just how many fuckwits does it take to put in a lightbulb at the Fed?

Every single fuckwit governor and pseudo-econ there!

Curiously enough, Real Economists such as Michael Hudson, Michael Perelman, Dean Baker and Mark Blyth aren't stymied by this typical bullcrap.

Wonder why . . . .

Fri, 06/05/2015 - 15:32 | 6167566 Temporalist
Temporalist's picture

I think Stiglitz must be reading ZH because he was just saying QE "boosts" (as in exacerbates) inequality:

Stiglitz: Fed’s Zero-Rate Policy Boosts Inequality

http://blogs.wsj.com/economics/2015/06/04/the-feds-zero-rate-policy-boos...

 

 

Fri, 06/05/2015 - 15:33 | 6167570 LawsofPhysics
LawsofPhysics's picture

many of the shills will change their stories to try and save their necks.

same as it ever was...

Fri, 06/05/2015 - 15:37 | 6167586 i_call_you_my_base
i_call_you_my_base's picture

Only a fool (Bernanke) would argue otherwise.

Fri, 06/05/2015 - 16:07 | 6167676 kchrisc
kchrisc's picture

More laying of the groundwork to pin it all on the FedRes donkey, while the rest of the criminals "exit" to Europe, or "return," flee.

Liberty is a demand. Tyranny is submission..

 

Fleas flee.

Fri, 06/05/2015 - 15:32 | 6167568 Hype Alert
Hype Alert's picture

Maybe when they figure this out they can ponder why VIX is down on a down market day.

Fri, 06/05/2015 - 15:34 | 6167575 lordbyroniv
lordbyroniv's picture

we are AALL so fucked.

 

You are going to need a diversified MINIMUM of $500 Million to esacape whats coming

 

imvho

Fri, 06/05/2015 - 15:45 | 6167614 BrotherRat
BrotherRat's picture

Hold on let me check my wallet to see if.. hmm no... just 100 kinds of different rewards cards...

Fri, 06/05/2015 - 15:37 | 6167579 ejmoosa
ejmoosa's picture

I'll vote for three.  Wages are sticky on the way down every time...unless you get fired.

 

And the lack of increases today is because there is no reason to raised them in such a lousy economic reality.  Bottom line?  Not enough profit to raise wages.

Fri, 06/05/2015 - 15:36 | 6167583 kchrisc
kchrisc's picture

"Confused Economists Ponder Missing Wage Growth "Mystery"

Not "missing," but stolen. Shipped off to Zion by the banksters.

Liberty is a demand. Tyranny is submission..

Fri, 06/05/2015 - 15:41 | 6167599 gwar5
gwar5's picture

Two things: Massive underemployment/unemployment in real terms, and massive amounts of cheap, illegal labor flooding the USA.

Where's my PhD?

Fri, 06/05/2015 - 15:50 | 6167626 chunga
chunga's picture

That hits workers at old-fashioned companies that actually still make products or services. A lot of the new businesses don't bother with any of that products and employees crap.

They make money by skipping right to the part where they just sell their stocks back and forth like twitter and candy gram, facebook. 

Fri, 06/05/2015 - 15:59 | 6167656 ShorTed
ShorTed's picture

Your genius in penetrating the issue certainly deserves a PhD.  However, tellling the truth automatically disqualifies you.  Sorry.

Fri, 06/05/2015 - 16:25 | 6167719 Wait What
Wait What's picture

i've explained this 'phenomenon' twice this week: wage stagnation, overseas manufacturing & hedonic adjustments are all part of the same dynamic: since the average american doesn't add any unique value to the production of a good, american wages & standards of living have to come down. americans have been overpaid for near 2 generations for production/services that can be provided more cheaply overseas, esp. now that the internet makes educating a workforce so much easier. hedonic adjustments reflect this 'trading down to the lowest common denominator,' which gives a semblance of inflation, but obscures the apples-to-apples comparison that gives REAL inflation rates.

start getting used to third world poverty, america, that's where your shepherds are steering you.

Fri, 06/05/2015 - 19:10 | 6168076 sgt_doom
sgt_doom's picture

Disney's Tomorrowland just replaced all their American IT workers with Indian workers.

Guess it really is . . .

TOMORROWLAND !!!

Fri, 06/05/2015 - 15:42 | 6167603 Bill of Rights
Bill of Rights's picture

Ha ha ha ha ha economists, ya sure.

Fri, 06/05/2015 - 15:57 | 6167654 replaceme
replaceme's picture

The numbers do not give a clear enough picture of the true labor story. That is a goal accomplished, not a statement of a problem.

Fri, 06/05/2015 - 20:04 | 6168195 FreeMoney
FreeMoney's picture

Well said.

Fri, 06/05/2015 - 16:18 | 6167698 Zen Master
Zen Master's picture

In other words: https://youtu.be/8gciFoEbOA8

 

Fri, 06/05/2015 - 16:24 | 6167724 MEFOBILLS
MEFOBILLS's picture

Did Keynes advocate for QE?  I would like for some proof of that.

 

"But admitting that would be to admit that trillions in QE has been an abject failure. That's Keynesian heresy and is never to be spoken of again."

 

Keynes advocated for exogenous money to stabilize the private credit banking system. 

 

QE is ENDOGENOUS money, meaning it is created within the private banking system.  The FED creates keyboard money and it is swapped for a DEBT instrument,  or some sort of financial paper.  The FED decides where to aim their keyboard...it could be at bonds, or it could be at MBS's.  Wherever they aim though, they need something to add to their double entry ledgers.  Their credit must have a mirror.

Exogenous money could be debt free money, or it could be gold dug up out of the ground.  It could also be a new TBILL that becomes public debt, and is then ignored.  Public debts owed to ourselves and which will never collect interest are effectively the same thing as exogenous money.

 

QE channels against debt instrument holders, and for the most part does not enter into productive part of economy.  Many of the "holders" acquired their debt instruments using fraud, so QE rewards fraud by holding debt price high.

Debt based private money needs to be thrown onto a crap pile. Stupid Economists cannot learn.  I guess we have to have more war in order to distribute wages and fund rent seeking special interests?

 sovereignmoney.eu

Fri, 06/05/2015 - 16:26 | 6167725 BoPeople
BoPeople's picture

No wage growth? There is an excess of available in all labor classes ... including honest people because there is not market for them, except at minimum wage.

... and the government and corporations keep whining for a flood of more work visas to keep the cost of labor down. And Obummer keeps flooding the US with illegals (which I actually do not have a problem with) and giving them benefits far beyond the current citizens (which I DO have a massive problem with).

Where is wage growth going to come from the Mr. Market says there is an excess of labor in all classes?

Fri, 06/05/2015 - 16:33 | 6167745 flyonmywall
flyonmywall's picture

+1 pitchfork here. I'm in for $1k.

 

Fri, 06/05/2015 - 16:36 | 6167754 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Keynes would have flooded markets with much more QE than that. The Keynesians will eventually become adamant that not enough QE was infused into the system entirely. They will argue that all the previous QE was malinvested into corporate buybacks intentionally so that he TBTF could make Titanic list and sink.

Fri, 06/05/2015 - 16:38 | 6167758 anachronism
anachronism's picture

These are all phony expressions of concern for the unannointed, unappointed, disqualified, and disconnected.

In a related article posted today on ZH, it was reported that there are 25 million foreign-born workers in the active U.S. workforce. Evidently they are willing to accept the lowered wages being offered here,  because those wages are still better than what they could earn in the nation of their birth for the skills that they have.

Apart from these foreign-born (many of whom could have become naturalized citizens), prospects are good to great for those with connections or credentials, and especially so for those whose incomes place them in the top 20%.

All told, these are more than enough to keep the upholders of the status quo well-off and optimistic about America's and their own futures. 

Fri, 06/05/2015 - 17:08 | 6167818 Miffed Microbio...
Miffed Microbiologist's picture

The reason these foreign born can except these low wages is they have far fewer expenses. They can walk into an ER and have medical care with no insurance. They can take advantage of our social services. They do not hold burdensome mortgages. They are well networked, living with friends and sharing expenses. They have no scruple to rape this society because they have no intention to assimilate or integrate. Couple this with oligarchs who need a source of cheap labor and the middle class is out maneuvered in all fronts and their demise a foregone conclusion.

The real question is do they have the will to correct this and do what must be done? So far, I think no. In my sphere, the most common idea is " we must vote in a better president to improve things". I have given up my counterpoints seeing their effect. Clearly things must become worse to see any meaningful change.

Miffed

Fri, 06/05/2015 - 17:57 | 6167937 lasvegaspersona
lasvegaspersona's picture

MM

It is not just the foriegn born who are IN the USA. We now must compete with those who still live in their country of birth.

They just get paid better here (and have access to the freebies) but their cousins back in Mexico (and China, Malaysia, Thailand, Singapore, Taiwan, Bangledesh etc etc) will work for even less.

This has been inevitible for years,and is just now really starting to show (and hurt).

Yellen was right. Select your parents better and for gosh sakes get some assets.

Fri, 06/05/2015 - 19:13 | 6168089 sgt_doom
sgt_doom's picture

anachronism repeats the usual bullcrap talking points from the US Chamber of Commerce and Business Roundtable, while MM below explains it to this chatbot/douchetard most perfectly!

Fri, 06/05/2015 - 16:46 | 6167773 dexter_morgan
dexter_morgan's picture

These are no doubt Keynsian economists and therefore fucking clueless and followers of a system perpetrated on mankind to move money upwards from the lower and middle classes through bullshit theory and increasing governmental involvement in economic activity and centralized planning.

I often wonder if Keynes was truly evil, or just sold out to the cabal.

Fri, 06/05/2015 - 22:26 | 6168501 rex-lacrymarum
rex-lacrymarum's picture

He was evil...and a very bad economist. 

Fri, 06/05/2015 - 17:29 | 6167865 SilverMoneyBags
SilverMoneyBags's picture

2% inflation over 20 years = 50% reduction in purchasing power...thats where your wage growth went.

Fri, 06/05/2015 - 20:19 | 6168238 cynicalskeptic
cynicalskeptic's picture

It's been worse than that over the past 20 years......

Over the last 20 years my local property taxes have tripled.   Fuel oil has quadrupled.   I don't even want to think about what food costs have done but a nice roast is now over $50.   Even hot dogs have tripled.

 

and even if the officially stated 2% inflation goal is met in the future, REAL inflation will be far higher given theway CPI numbers are calculated....   (I expect the next 20 years will be FAR worse - if the US$ even lasts that long..... we're headed for Weimar territory sooner or later)

Fri, 06/05/2015 - 17:51 | 6167917 q99x2
q99x2's picture

When does the price of a loaf of bread as a percentage of poor people's incomes = revolution?

Fri, 06/05/2015 - 17:54 | 6167925 Anunnaki
Anunnaki's picture

These Economic Witchdoctors are a joke. Kind of like Garden Gnome Greenspan testifying that nobody could anticpate moral hazard in the Greenspan Recession of '08

Of course the oligarchs want it all for themselves. They resent have to pay anyone for anything. 

Maybe the reason why Emperor Peace Prize is keeping Obamatrade* secret is that it brings back slavery

*TTP, TTIP 

Fri, 06/05/2015 - 18:06 | 6167960 Karaio
Karaio's picture

No return.

When you close a factory with 1,000 employees, many will be pissed off with unemployment.

They will try to change cities and perhaps profession.

Ligística whole chain of supplies is broken.

It takes at least eight to ten years to put a foot factory with "spirit de corps" consistent.

Place a manufacturing oiled way is not easy.

I followed this closely when the Mitsubishi and Jhon Dree and Suzuki came to settle in the city of Catalan - State of Goias, Brazil.

Assemble the sheds, the physical structure is easy!

Enlist the skilled labor was something insane.

Move entire families who lived more than 1,000 kilometers away, assemble teams was not a thing.

Today, after 15 years it works.

Several factors influence.

Climate, topography, proximity to family, bring a competent official is expensive, very expensive.

Breaking or closing a business is easy, "fuck the employee."

Create a new nothing is insanely hard!

If the guys on Wall Street pensasem less cash and more production in the US would not be in the pits.

They killed the goose that lays the golden eggs.

Unfortunately.

: - /

Fri, 06/05/2015 - 19:25 | 6168116 Bemused Observer
Bemused Observer's picture

I am content in the knowledge that the amount of money TPTB would have to part with to allow wages to adjust properly will never be willingly spent.
They will destroy the system first. The sooner, the better, so the deadwood can be cleared away, making room for REAL growth.

Fri, 06/05/2015 - 19:52 | 6168175 XRAYD
XRAYD's picture

The truth is quite simple .. a lot of people stole money in a game rigged by Washington.

And now savers and workers are paying for it!

And when it ends, all the low wage hiring companies will have loaded themselves up with debt (buy backs, take overs, etc.) more carnage will follow.

People who need jobs will take whatever they can because of a sense of dignity. Others will keep sucking at the government teats ... from the top, and the bottom!

Of course, economists and journalist in the big media that tell us us the "news" all have a vested interest, and couldn't care less about the lives of American workers; just their own jobs.

Fri, 06/05/2015 - 20:07 | 6168194 razorthin
razorthin's picture

You'll need to wait on China and India for another 20 years while they catch up.

Entropy, assholes!

Ross Perot warned us, you see.

Fri, 06/05/2015 - 20:55 | 6168321 silverer
silverer's picture

And at the time, our national debt was only 4 trillion, and we managed to have small budget surpluses.  Boy, those were the good old days!

Fri, 06/05/2015 - 20:54 | 6168318 silverer
silverer's picture

The only way to fix it now is to raise taxes to 85% and put everyone on unemployment.  Nancy Pelosi said that unemployment is good for the economy.  Problem solved.

Sat, 06/06/2015 - 06:56 | 6168846 atlasRocked
atlasRocked's picture
Keynesian Beauty Contest Reveals Con Artists Sell “Stimulus”

Years ago I started making this offer:  A $50 gift certificate for the winning example:

Keynesian stimulus was used in the
country _____ in the years ______,
during a __ recession/__ depression,
then the economy turned around within 2
years, and then produced ___  years
of lasting growth WITHOUT A WAR after this.
The increased tax revenue was enough to
pay off all the deficit the stimulus
had created within ______ years.

I’ve been posting this challenge on multiple forums for over 5 years, still no winners yet.  It appears the liberals went out and cheered for Obama’s trillion dollar stimulus with exactly …. wait for it…. ZERO success stories.

http://www.teapartytribune.com/2015/05/18/keynesian-beauty-contest-revea...

Sat, 06/06/2015 - 11:52 | 6169323 MEFOBILLS
MEFOBILLS's picture

I am going to say it again so that it is very clear.  QE is endogneous money.  It is created within the private banking system.

 

Exogneous money, created outside of the private credit banking system, used to be Treasury money and coins.  

 

Very little of the money supply today is exogenous.   The western world has an endogenous money supply...it is banker controlled credit fiat.  This type of fiat is private credit that got sanction from government law.  

Why governments gave their money power to private bankers is another discussion.  However, it is clear that private bankers and the money power are a shadow government.

 

Do NOT follow this link or you will be banned from the site!