December 10, 2024
The Bureau of Labor Statistics indicated that hourly compensation rose 3.1% in the third quarter after rising 1.0% in the second quarter. In the past year compensation has risen 4.3%.
Growth in hourly compensation is a good thing, but that increase can be offset by inflation. So what we are also interested in is real hourly compensation. In the third quarter real compensation 1.8% after falling 1.8% in the second quarter. In the past year real compensation has risen 1.6%. The third quarter increase consisted of a 3.1% increase in compensation which was partially offset by a 1.3% increase in inflation, hence a 1.8% increase in real compensation. If the labor market remains relatively tight, real compensation should continue to climb in the quarters ahead. Real compensation declined steadily through 2021 and 2022. Workers are beginning to regain some of that compensation that they lost during the recession.
The level of real compensation jumped in 2020 and the first half of 2021 as government stimulus checks boosted income. But real compensation declined steadily in the second half of 2021 and 2022 as inflation soared. From 2010 to just prior to the 2020 recession real compensation rose 0.8% per year. At 1.6% in the past year real compensation is now growing more quickly now than it did prior to the recession, and the level of real compensation today is 1.6% higher as it was than it was prior to the recession. Workers are finally better off than they were four years ago.
Stephen Slifer
NumberNomics
Charleston, SC
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