Wages Climb Higher, Faster

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By John Robertson

The Atlanta Fed's Wage Growth Tracker is a three-month average of median growth in the hourly earnings of a sample of wage and salary workers taken from the Current Population Survey. Last month in a macroblog post, I noted that the Wage Growth Tracker reading for September, at 3.6 percent, was close to where it had been hovering since April. However, I also noted that the non-averaged median wage growth for September was at a cyclical high of 4.2 percent, and so it would be interesting to see what the October data revealed. Well, the October data are in, and they do confirm a sizeable uptick in wage growth over the last couple of months. The median wage growth for October was 4.0 percent, which brings the Wage Growth Tracker up to 3.9 percent - a percentage point higher than a year ago, and now the highest level since November 2008.

In addition, nominal wage rigidity, as measured by the fraction of workers reporting no change in their hourly rate of pay from 12 months earlier, declined to 13 percent - the lowest since April 2008.

The rise depicted by the Wage Growth Tracker is consistent with the recent trend in average hourly earnings from the payroll survey (up 2.8 percent from a year earlier in October - the fastest pace since June 2009). This increase is occurring even though the unemployment rate has changed little in recent months and is only 10 basis points lower than a year ago. Perhaps employers are finally catching up to the realities of a low unemployment rate. Larger wage gains may also be behind why we are seeing fewer workers leave the labor force. Labor force participation is some 30 or so basis points higher than it was a year ago, and this is primarily because the flow out of the labor force has slowed.

Note: The Wage Growth Tracker website now contains data for the smoothed and unsmoothed series going back to 1983. Previously, the historical data started in 1997. You will notice gaps in the time series in 1995-96 and 1985-86 because the Census Bureau masked the identifiers used to match individual earnings during those periods.

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