EconomyNow: An Atlanta Fed Research App Federal Reserve Bank of Atlanta

The Current Population Survey (CPS) from the US Census is one of the oldest, largest, and most well-recognized surveys in the United States. Every month, the survey is used to collect information from a probability-selected sample of about 60,000 households. The US Bureau of Labor Statistics then uses those data to calculate the median usual weekly earnings of wage and salary workers.

  1. In a statement, it marked a policy shift by dropping previous wording that had said it was still considering further rate hikes.
  2. Total labour input at the start of the pandemic fell substantially, by around 16%, owing mainly to the drop in hours worked per employee.[4] Measures of compensation per hour increased significantly as a result, given the lower denominator.
  3. The longer inflation and inflation expectations remain elevated, the higher and longer-lasting the pressures on wage growth are likely to be.
  4. While Fed officials have signaled they will lower their benchmark rate this year, they haven’t signaled when they will begin, a decision eagerly awaited by Wall Street investors and many businesses.

Explaining that variation remains a challenge for economists who often attribute it factors such as differences in productivity growth at the individual and firm level. Your own wage growth experience might not look like that of your neighbors or your colleagues, and it might not resemble that of the person with median wage growth either. The median wage growth is a useful guide to shifts in the distribution of wage growth over time, but it doesn’t fully capture the breadth of wage growth experiences across individuals. Labour input, as measured by total hours worked, recovered strongly in both the euro area and the United States on the back of different adjustment patterns and government support throughout the crisis.

This is primarily due to the requirement that the individual has earnings in both the current and prior year. Older, more educated workers are more likely to be continuously employed than other wage and salary earners. Our EconomyNow app gives you access to our most popular charts, including GDPNow and the Wage Growth Tracker, so you can view the latest data on inflation, growth, and the labor market. You can find more information about EconomyNow, including links to the App Store and Google Play, on our app page. This alternative rounding method reduces the impact on the Wage Growth Tracker series relative to the current proposal by about one-third. Specifically, the mean absolute difference between the unrounded Tracker series and the series based on the currently proposed rounding scheme is 0.03 percentage points, versus 0.02 percentage points using my alternative.

Powell said that would likely mark the peak, and that rate cuts would only come once policymakers have “greater confidence that inflation is moving sustainably down to 2%.” The release comes two days ahead of the Labor Department’s nonfarm payrolls report, which is expected to show growth of 185,000, against the 216,000 increase in December. While the ADP data can provide a barometer for private sector hiring, the two reports often differ, with ADP often undershooting the Labor Department’s numbers. Chart 4 shows the trimmed-mean series constructed using rounded earnings data, along with the (median) wage growth tracker series that uses unrounded data. I would describe this trimmed-mean series as a reasonable (though not perfect) approximation of the Wage Growth Tracker series (something we could have used if we only had rounded earnings data in the past).

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Only one sector — information services (-9,000) — reported a decline, but hiring was slow across virtually all sectors. Wage growth is still elevated on a year-over-year basis, but data from the Indeed Wage Tracker points toward a continued slowdown. FRED has added 67 Wage Growth Tracker data series from the Federal Reserve Bank of Atlanta. So, for example, $19.99 an hour would become $20, whereas $19.95 an hour would be unchanged.

Slowing wage growth might be welcome news for central bankers, but on its own, it would be concerning for workers and job seekers. However, weaker nominal wage growth has been paired with a more pronounced reduction in inflation. The result is that wages, on average, are growing faster than inflation, and more workers are currently getting inflation-adjusted raises than in 2022, when nominal wage growth was faster than today.

The Atlanta Fed’s Wage Growth Tracker (WGT) measure of year-over-year nominal wage growth has been elevated during the last couple of years. Although this level is down from its high of 6.7 percent in June and July of last year, it is much higher than the 3.6 percent average seen in 2019, before the COVID-19 pandemic. For example, the consumer price index (CPI) increased 6.5 percent from December 2021 to December 2022. Once we have constructed the individual hourly earnings data, we match the hourly earnings of individuals observed in both the current month and 12 months earlier. The matching algorithm results in about 2,000 individual wage growth observations per month. We then compute the median of the distribution of individual 12-month wage changes for each month.

Month Moving Average of Unweighted Median Hourly Wage Growth: Work Status: Full-Time

Rising worker productivity may mean Fed officials will need to rethink how much economic and employment growth can occur without stoking inflation, he said, according to the paper. “The Fed would be very wary of cutting into a reaccelerating economy,” wrote Evercore ISI economists. “Strong growth and employment makes the Fed want to accumulate more evidence subdued inflation can continue.”

Growth in pay and benefits, as measured by the ECI, peaked at 5.1 percent in the fall of 2022. Yet at that time, inflation was rising much faster than it is now, thereby reducing Americans’ overall buying power. The Fed’s goal is to slow inflation so that even smaller pay increases can result in inflation-adjusted income gains.

Month Moving Average of Unweighted Median Hourly Wage Growth: Services Sector

The current proposal would instead compute a dynamic topcode value that varies in a way that would result in the top-coding of only the highest 3 percent of earnings each month. Although that change means more observations to use to compute the Tracker, those observations will come from a part of the wage distribution that might exhibit quite distinct wage growth properties. For example, wage growth tends to be lower for people at the end of their careers than at the start, and if the highest wages are mostly from people with relatively low wage growth, median wage growth could be pulled lower. Unfortunately, without access to the historical wage data that are not topcoded, constructing a counterfactual to explore the impact of this proposed change is simply not possible. Perhaps someone at the Census Bureau will explore the impact this change has on the properties of the wage growth distribution. For example, about 57 percent of the WGT sample had positive real wage gains during 2019, whereas during 2022, only 45 percent of people had positive real wage growth.

Unweighted Median Hourly Wage Growth ( : Overall

To the extent that employees try to compensate for this loss of purchasing power, this could affect nominal wage demands. Real producer wages reflect the cost pressures implied by nominal wage growth relative to the overall growth in the price of output. The volatility of CPE growth in the euro area has mainly been driven by contact-intensive services. As a result, these services are the most affected by base effects, so wage growth here has been strong recently. CPE growth in industry and construction also declined at the start of the pandemic, but to a smaller degree, while wages were relatively smooth in non-contact-intensive services and public services.

Put another way, despite higher median nominal wage growth, the share of people with positive real wage growth between 2019 and 2022 due to higher inflation fell by 12 percentage points. The Atlanta Fed’s Wage Growth Tracker is a measure of the nominal wage growth of individuals. It is constructed using microdata from the Current Population Survey (CPS), and is the median percent change in the hourly wage of individuals observed 12 months apart.

During the Great Recession, wage freezes became especially prevalent and have persisted at a high rate through much of the recovery. Only in the last year have we seen any notable decline in the percent of individuals experiencing zero wage change. For more information on this and its relation to models of nominal wage rigidity, see the work by our colleagues at the Federal Reserve Bank of San Francisco (Daly, Hobijn, and Wiles 2012 and Daly and Hobijn 2014). The distribution of individual wage growth is broadly similar to that shown on the Federal Reserve Bank of San Francisco website, although the methodology underlying the construction of the individual wage growth distribution differs somewhat.

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So far there has been no evidence of a change in the wage growth trend in terms of compensation per employee since the start of the pandemic. Looking through the volatility of the past couple of years, the levels of the main wage indicators, like compensation per employee and compensation per hour, currently stand slightly above those implied by pre-pandemic long-term trends. Adjusted for pandemic-related effects, the level of CPE growth has essentially returned to its pre-pandemic long-term trend. The Federal Reserve Bank of Atlanta also uses CPS data, and the FRED graph above shows monthly values of the wage growth tracker the Atlanta Fed produces with the data. The households sampled in the CPS are interviewed at regular intervals, and the Atlanta Fed measures the growth rate of typical labor earnings by comparing the wages of about 2,000 anonymous individuals who respond to the same survey 12 months apart.

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