Not So Fast: This Is Where All The "Blistering" Hourly Earnings Growth Came From

Tyler Durden's picture

There is a simple reason why the vast majority of American workers, some 82% of them, are not feeling any wage growth: there simply isn't any.

After today's jobs report, Wall Street has been fast to ignore the modest headline payrolls disappointment, which in December rose less than expected following an upward revised November, and focus exclusively on that "other" number, the jump in average hourly earnings, which in December rose 0.4% on a monthly basis, and a blistering 2.9% Y/Y, the highest annual growth since the financial crisis, as shown in the chart below.

Wall Street analysts were quick to praise the jump in hourly earnings, such as Deutsche Bank's Alan Ruskin who said the following:

The particular medium-term relevance of the acceleration in earnings is:

i) this is coming well before any fiscal stimulus hits, and underscores the unusual timing and therefore inflationary influence that a fiscal stimulus can have at this point in the business cycle;

ii) it tends to provide evidence that indeed the economy is at full employment and that estimates of the nature rate are not apt to drift much lower, negating some of the spare capacity participation arguments that would suggest otherwise.

iii) it plays to the idea that the Fed may already be behind the curve, not least because the impetus from lower oil prices has turned more inflationary as well.

A nice analysis, there is just one problem: it may well be totally wrong.

As we try to point out every month, this headline hourly earnings number - impressive as it may be - tells an incomplete story as it consolidates earnings for two very distinct labor groups in the US, production & nonsupervisory employees, which comprise the vast majority, or 82.3% of the labor force, and the top echelon of workers, the 17.7% of private workers who are classified as supervisory, and managerial.

What happens when one looks at just the subset of production and nonsupervisory private workers, which in October amounted to 101.3 million, or just over 82% of the entire private workforce? Well, we find that their wage growth story is very different. According to the BLS, these particular workers made on average $21.80 per hour, up only 2.5% from $21.26 a year ago, which as the chart below shows is where wage growth for this group has been for three years, and after a modest dip in late 2014, has been largely unchanged since the start of 2014.

Indicatively, this particular group of workers saw a 4% annual growth in wages at the time the 2007 recession hit.

In other words, for the vast majority of American workers, real wage growth is still as anemic as it has been for years, barely outpacing official measures of inflation. 

So where did the wage growth come from? Simple: the 17.7% of supervisory, managerial private workers that are excluded from the above grouping, but make up the balance of America's 123.1 million private workers. It is this group that saw a surge in their implied average wages, which soared by a record high 4.7% in December!

So when the Fed sits down next time to pats itself on the back for a job hike well done in hopes of "keeping inflation in check", it may want to hike rates only for those 18% of workers who are benefitting from rising wages, because for the rest of America, the income picture remains as dreary as it has been for years.

* * *

PS: in this above post we did not discuss something which may be even more troubling: while average hourly earnings are indeed rising (if mostly for managerial employees), on a weekly basis, there is barely any earnings growth.

This means that the only reason why wage growth appears to be rising, if purely for optical reasons, is because number of hours worked continues to decline, hardly an indicator of a stable recovery.

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FreeShitter's picture

The USSA has been in recession since the dot com bullshit. The fed, cb's, the govt, and the useless puppets have all facilitated this scenario.

junction's picture

America never really recovered from the 9/11 attack.  Using that "Reichstag Fire" event as a pretext, the Bush Crime Cartel overthrew the Taliban government in Afghanistan and made deals with the warlords now in power again there to ramp up production of heroin for Air Force shipment to the United States. 

HokumYTrader's picture
HokumYTrader (not verified) Jan 6, 2017 9:43 AM

Look at all the jobs Trump created even before he was sworn in!


It is not a Bubble!

BabaLooey's picture

Do this.

Act like you're unemployed - AND GO OUT AND LOOK FOR WORK.

Try it.


THIS is the asshat left's horse shit amalgamation/discomboobulation of "full employment".

I said this to a Soetero/Canks shit sucker. The nitwit's reply: "Well, it's full employment when there are no jobs to be had."


Cautiously Pessimistic's picture



I mean....


angry_dad's picture
angry_dad (not verified) Jan 6, 2017 9:42 AM

Obama's chinese algebra used to fabricate  phony + employment stats didn't fool anyone.

These unemployed folks were the tip of the spear that ousted the crooked dem nominee and converted over 1000 dem leadrship seats to the winning GOP team.

TRUTH is a beautiful thing.

SoDamnMad's picture

Uncle Warrengot a wage increase (after the dems revealed all the end of year info that allowed his to go short on some things and long on others).

Iconoclast421's picture

Average employees have gotten so dumb it takes higher pay for supervisors to want to deal with them.

Dr. Spin's picture

...and who is responsible for "dumbing" them down?


TheFulishBastid's picture

Most of you "management"types ain't exactly rocket surgeons either.

Consuelo's picture



'Nurse...!!!  Hand me a lighter ---- I mean, a forceps...



Dr. Engali's picture

We clearly need to import moar third world labor to bring down these costs. Mr. Trump... tear down that wall. Oh wait.....

new game's picture

i will go with the "behind the curve" analysis. closer to reality. inflation is real, as anybody knows that has to buy stuff to live...

fed failure of anyone not in the .01 of a percent class, same as always. there is only one mandate, comand control economy feathering the silk sheet beds of the ruling class.

HokumYTrader's picture
HokumYTrader (not verified) Jan 6, 2017 9:45 AM

There will be a lot of jobs building the wall, as long as you don't mind not getting paid

HokumYTrader's picture
HokumYTrader (not verified) Jan 6, 2017 9:46 AM

Bob Pisonme is confused as to why stawks are not up.

HokumYTrader's picture
HokumYTrader (not verified) HokumYTrader Jan 6, 2017 10:01 AM

There ya go Bob the Algos dont want you confused

JackMeOff's picture

Sounds like Jethro Bodine ciphering - 4 knot plus knot carry the 6 until next month = Legacy!

small axe's picture

BLS lying? Be still my beating heart.


spastic_colon's picture

"Wall Street analysts were quick to praise the jump in hourly earnings............."

Its almost as if the articles were prepared in advance.

HokumYTrader's picture
HokumYTrader (not verified) spastic_colon Jan 6, 2017 10:13 AM

Robo articles, they count as employed.



Algos on wall street count as employed as well

Rainman's picture

I, the Penis, hereby request a raise in salary for the following reasons:
I do physical labor.
I work at great depths.
I plunge headfirst into everything I do.
I do not get weekends or public holidays off.
I work in a damp environment.
I work in a dark workplace that has poor ventilation.
I work in high temperatures.
My work exposes me to contagious diseases.

P. Niss

spastic_colon's picture

at least porn pays pretty well.............

edifice's picture

If you happen to have a foot-long-dong.

Consuelo's picture



Doing well now...?


Watch what happens when this thing rolls over (pun intended)...    Pussy is gonna get real cheap.

Spungo's picture

Why would one expect wage growth to exceed inflation? Serious question. One should only expect that to happen when worker productivity is increasing. For a lot of us, productivity is not increasing. I'm using the same computer and software as last year and the year before. I do the same work, but I'm better at the work I do, so that gives me a bit more productivity just because I'm older. 

canisdirus's picture

Because wage growth has undershot inflation since sometime in the 1970s. We've had about 30-40 years of declining wages relative to inflation. Not counting the low labor participation rate, median income should be about 40k higher than it is now.

HokumYTrader's picture
HokumYTrader (not verified) Jan 6, 2017 10:08 AM

It is the weather, just uttered on CNBS

Stan522's picture

The ultimate deliverer in FAKE News... The American government with their agenda.....

Thebighouse's picture

Very consistent use by obummer of agendized statistics.


obummer ought to be placed in a very very dark prison cell.


scoutshonor's picture

As I recall very recently overtime rules were expanded to provide O/T compensation for managerial employees.  This had the effect of including a percentage of employees (MacDonald's shift supervisors) in the overtime pool.

It is possible that the change in income was largely a result of this change.

Spungo's picture

That's a good change. The US is probably the only developed country in the world where unpaid overtime is legal.

MagnusSilver's picture

The decision was walked back before the December 1st deadline so the new overtime law never became reality.

scoutshonor's picture

Thank you for the update--I should pay better attention, but there is alot to keep up with.  Happy 17'

RovingGrokster's picture

Meanwhile food inflation continues apace.

You're going to start seeing the kind of trouble (strikes, etc) that happen when wages do not keep pace with (undocumented, but real) inflation. If employers are actually able to boost wages a little, a wage/porice spiral could ensue, with cries for wage and price controls.


Let us hope Trump's cabinet does not fall for the same nostrums as that Commie, Nixon. (Commie, why, yes: Wage and price controls, currency inflation, more agencies to eat out our substance....)

SweetDoug's picture

How to lie with statistics.