The Most Important Economic Number Isn’t GDP or Unemployment. It’s Wages.

A few days ago I urged everyone to pay less attention to consumer spending (which was up in March) and more attention to personal income (which wasn’t). After all, income is the key to everything else. Spending may go up for a single month or two even if incomes are flat, but it won’t rise steadily unless incomes are rising too.

Over at The Upshot, Binyamin Appelbaum passes along a new research study that comes to the same conclusion:

Ignore April’s sharp drop in unemployment. Pay no attention to the creation of 288,000 jobs announced on Friday. The most important number in the latest jobs report did not change at all.

Average hourly wages for American workers held steady at $24.31 last month. They have increased just 1.9 percent over the previous 12 months. But after adjusting for inflation, real wages have increased by something like 0.5 percent.

David G. Blanchflower, an economics professor at Dartmouth College, and Adam S. Posen, president of the Peterson Institute for International Economics, argue in a new paper that the slow pace of wage growth is the best indicator of an incomplete economic recovery. Until wages start rising more quickly, the economy remains far from healthy.

Measures of unemployment are inherently tricky. But the authors of the paper point out that you can cut through a lot of the uncertainty by simply looking at wages. “Wage inflation, after all, is basically a summary of the balance between supply and demand. Employers raise wages as they find it harder to hire and retain qualified workers, so the market, in effect, is constantly judging the extent of labor market slack.” Translation: Unless people have more money to spend, the economy just isn’t going to grow.

If wages aren’t rising, then there’s still a lot of labor market slack no matter what the headline unemployment numbers say. And right now, wages aren’t rising. It’s no time for the Fed to be thinking about putting its foot on the brake.


The more we thought about how MoJo's journalism can have the most impact heading into the 2020 election, the more we realized that so many of today's stories come down to corruption: democracy and the rule of law being undermined by the wealthy and powerful for their own gain.

So we're launching a new Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption. We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We'll publish what we find as a major series in the summer of 2020, including a special issue of our magazine, a dedicated online portal, and video and podcast series so it doesn't get lost in the daily deluge of breaking news.

It's unlike anything we've done before and we've got seed funding to get started, but we're asking readers to help crowdfund this new beat with an additional $500,000 so we can go even bigger. You can read why we're taking this approach and what we want to accomplish in "Corruption Isn't Just Another Scandal. It's the Rot Beneath All of Them," and if you like how it sounds, please help fund it with a tax-deductible donation today.

We Recommend


Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.


Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.