Not a tight labor market. Jared Bernstein writes:
Compensation Up, But So Is Inflation: Jared Bernstein
Today’s Employment Cost Index from the Bureau of Labor Statistics showed a pickup in the growth of compensation, to 0.9% in the second quarter of the year, compared to 0.6% in the first quarter. However, consumer inflation was 1.3% in the second quarter, meaning compensation fell in real terms.
Though the tighter job market has recently generated slightly faster growth in workers’ pay, inflation has accelerated also. As the figure shows, real compensation (wages plus benefits) has declined, on a yearly basis, for the past four quarters.
Furthermore, today’s GDP report shows much slower growth in the second quarter (2.5% versus 5.6% in the previous quarter), suggesting that Fed rate hikes, higher energy costs, and the cooling housing market are taking hold in the overall economy. As this slower growth translates into weaker job growth, compensation too may slow in coming quarters. Thus, even considering average compensation—a measure which includes wages and benefits of all workers, even the very highest earners—most workers continue to fall behind, even as the economy expands.
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