May 5, 2022

The Bureau of Labor Statistics  indicated that hourly compensation rose 3.2% in the fourth quarter after having jumped 7.4% in the fourth quarter.  In the past year compensation has risen at a 6.5% pace.

Growth in hourly compensation is a good thing, but some of that increase can be offset by inflation.  So what we are also  interested in is real hourly compensation.  In the first quarter real compensation declined 5.5% after having declined 0.5% in the fourth quarter.  In the past year real compensation has declined 1.4%.  The first quarter drop consisted of a 3.2% increase in compensation which was more than offset by an 8.7% increase in inflation.  In the seven quarters since the last recession ended real compensation has fallen at a 1.5% pace.  Over the past decade real compensation has risen 0.8%.  If inflation continues to exceed the increase in compensation workers will seek even bigger increases in compensation to get their real compensation back on the upswing. That will further boost the inflation rate.

Stephen Slifer

NumberNomics

Charleston, SC