Are Wage Gains Picking Up? Stalling? Questionable Data Makes This kind of Hard to Say

“We have trouble measuring any of these things,” said Tara Sinclair, an economist at George Washington University along with for the job-search site Indeed. “This kind of can be definitely one of those situations where you can feed within the data along with get out whatever response you’re looking for.”

The problem can be not brand new. This kind of has, however, risen in importance as wage growth — why This kind of has been slow, along with when in which might change — has emerged as a pre-eminent issue in Washington along with on Wall Street. Congressional Republicans, their eyes on the fall elections, are seeking evidence in which their recently passed tax cuts are producing an impact on paychecks. Federal Reserve policymakers are looking for signs in which the tightening labor market can be causing inflation.

Financial markets tumbled a month ago after the data showing strong wage gains heightened fears in which inflation would certainly pick up, forcing the Fed to hasten interest-rate increases. The report released on Friday had the opposite effect: Stocks rallied on the prospect in which strong job growth could continue without causing the economy to overheat.


A Walmart fulfillment center in Bethlehem, Pa. Conflicting data has clouded the effort to measure pay gains in a strong labor market.

Sam Hodgson for The brand new York Times

Robin Brooks, chief economist for the Institute of International Finance, an industry group, said the market volatility over wages a month ago was “way premature.”

“Markets are completely overreacting,” he said. “We basically have steady-as-she-goes mediocre wage inflation.”

All economic figures come with significant uncertainty. This kind of can be common for different measures to disagree about the pace of job growth, consumer spending along with various other key indicators. yet wages pose a particular measurement challenge. Surveys, the source of much economic data, can be unreliable because people often err in recalling the details of their income, or they may decline to answer questions about This kind of. Companies, for their part, track how much they pay their employees yet not necessarily how many hours they work, at least for those who are salaried.

The measure in which tends to get the most attention by investors along with the media can be average hourly earnings, a figure released by the Bureau of Labor Statistics as part of each month’s jobs report. The figure, based on a survey of employers, can be timely along with easily understood: simply the total amount in which companies paid workers in a given period, divided by the hours those employees worked.

Despite the familiarity of the average hourly earnings figure, however, economists say in which This kind of can be among the least reliable indicators, especially within the short run. The monthly data can be prone to distortions because of bad weather or quirks of the calendar (even an oddly timed holiday can skew the numbers). The measure can be also affected by trends like the retirement of the baby boom generation, rising health care costs along with the spread of contract work — long-run shifts in which affect average earnings in subtle yet significant ways.

various other measures try to account for at least some of these issues by, for example, factoring within the cost of benefits or by controlling for the changing mix of industries within the American economy. yet these indicators have their own problems, including smaller sample sizes. along with almost all are released at a significant delay.

“The problem can be in which there can be no perfect measure of wage growth,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, a research firm. “There can be no right answer; there never will be a right answer.”

The best way to deal with the conflicting signals, economists say, can be to look at a range of indicators — or to average them together — along with to ignore short-term fluctuations in favor of longer-term trends. Taken together, the various measures suggest in which wage growth has been weak yet has crept upward gradually as the economy has enhanced.


6 Reasons in which Pay Has Lagged Behind U.S. Job Growth

Average hourly earnings were 2.9 percent higher in January than a year earlier, a hopeful sign in which wages might be gaining traction in a tight labor market. Their stubborn failure to do so can be one of the mysteries of a recovery today in its ninth year.

OPEN Graphic

Focusing on the long run, however, does not solve another problem in which increasingly concerns economists: signs in which data about Americans’ earnings along with income can be getting less reliable. Most government statistics, for instance, have failed to adapt to the rise of the so-called gig economy along with various other trends in which are changing the relationship between companies along with workers. The hourly earnings measure within the monthly jobs report excludes Uber drivers along with similar contractors.

“I don’t think any of these measures do very well with nonstandard work arrangements,” said Katharine Abraham, a University of Maryland economist who recently led a government commission in which studied how data might inform public policy.

Moreover, Americans are increasingly refusing to respond to government surveys. The response rate to the monthly Current Population Survey, the data source in which underlies the unemployment rate along with many various other key statistics, has eroded in recent years. Of the households in which do respond, about a third refuse to provide information about their earnings, a rate much higher than for most various other questions. Similar problems have affected various other government along with private-sector surveys.

“Every measure of data quality in which we look at seems to have declined over time,” said Bruce D. Meyer, a University of Chicago economist who has studied falling response rates.

Economists who have studied the issue say in which aggregate statistics, like the overall median hourly wage, remain reliable. yet falling response rates are a bigger problem when This kind of comes to studying high or low earners, or specific demographic groups. along with the shrinking sample sizes make This kind of harder to recognize between true patterns along with statistical noise.

Government statisticians are trying to find ways to improve the data, perhaps by supplementing surveys with records by Social Security records, tax filings or various other sources. yet such records pose logistical along with potentially legal hurdles, along with often are not available on a monthly or even quarterly basis.

The private sector, too, can be looking for solutions. The payroll processing firm ADP recently began releasing a quarterly report on earnings based on data This kind of collects by 330,000 American employers.

“To truly get down to the details with surveys can be hard,” said Ahu Yildirmaz, who heads the ADP research group in which produces the report. “This kind of can be where the private data comes into the picture.”

Independent economists said in which data by private sources like ADP showed promise, yet could not replace government statistics. along with because they are relatively brand new, This kind of can be not clear how they will respond when a recession hits or the economy improvements in various other ways.

Continue reading the main story