Dr. Ed’s
Economic
Indicators

AVERAGE HOURLY EARNINGS

Release Date: Monthly
Release Coverage: Prior Month's Data
Released By: Bureau of Labor and Statistics
Official Release (weekly): http://www.bls.gov/ces/

The Average hourly earnings release is a monthly reading of the earnings of hourly plant and non-supervisory workers in the private sector. The release is an indicator of labor cost inflation and of the tightness of labor markets. Uncharacteristic growth in wages generally is attributed to inflationary adjustments within companies. The reading excludes salaried workers unlike the employment cost index. An unadjusted annualized growth of 4-5% indicates 2-3% productivity growth and 2% CPI growth.

WHAT DR. ED SAYS:

High rates of growth of average hourly earnings would lead to higher inflation if the wage growth were above productivity growth. However, it does not consider all benefits costs (fringe benefits such as medical benefits), or it may increase because more workers are employed in better skills jobs that pay higher hourly wages rather than because the same jobs pay higher hourly wages. Also, the average hourly earnings increase can be due to temporary wage hikes, such as overtime.

Combining this index with overall employment readings will help decipher whether or not the changes are related to inflation or overtime. Clarifying this can be important as part-time or hourly wages are a key fall back to many when faced with unemployment.

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