(March 14, 2008) – After 4 months of falling real hourly earnings, workers caught a (small) break. But don’t get used to it. It happened because the CPI was flat in February–entirely a result of volatile oil prices. Next month will show what happens when oil prices breach $100 per barrel. Not so good.
The BLS released the February Real Earnings estimates this morning, reporting that real average weekly earnings rose by a seasonally adjusted 0.3% from January to February, resulting from a 0.3% increase in average hourly earnings. The CPI-W and average weekly hours were unchanged from last month.
Average weekly earnings increased by a seasonally adjusted 3.7% from one year ago; after deflation by the CPI-W, average weekly earnings actually decreased 0.8%. Before seasonal and inflation adjustment, average weekly earnings were $595.86 and $574.48 in February 2008 and February 2007, respectively.
In the details of the report you will see that the eye of the storm is retail trade, where hourly earnings increased by just +0.7% over the last 12 months and real earnings fell 3.5% for the year.
As always, take these data with a grain of salt. Weekly earnings are calculated by dividing total payroll numbers by total people employed–whether they are full-time or part-time, and people holding multiple jobs of either sort are counted as multiple people. This overstates total workers and understates average earnings.
But overall, the report tells us something about the labor market we already know. Paychecks are rising slower than GDP, and prices are rising faster than paychecks.