Can We Please Stop Using Nominal Wage Figures to Tout New Records?

Here is the Wall Street Journal today:

Wage growth accelerated, with average hourly earnings for private-sector workers climbing 0.34% on the month and up 2.9% over the past year. That was the strongest year-over-year gain since June 2009.

I am so tired of reading this kind of thing, especially in a newspaper aimed at the financial and business communities. The Journal is presenting nominal wage growth and calling it the “strongest” since 2009. But who cares? If inflation is running at 5 percent, that would be a wage decrease. If it’s running at 0 percent, that would be terrific growth. So what does real wage growth look like?

Adjusted for inflation—which is the only metric that matters to economists and workers alike—wages were up slightly more than 1 percent. The last time we saw growth that high was…16 months ago.

Real wage growth of 1 percent isn’t horrible. I happen to prefer looking at wages for nonsupervisory workers, which were up only about 0.6 percent, but that’s a matter of taste. What’s not a matter of taste is adjusting for inflation. Real wage growth in January was OK, but it was no record breaker.


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