Originally Published: September 18, 2016 6 a.m.
The Bureau of Labor Statistics released the August Real Earnings Report on Friday, noting that there has been a 1.3% increase in real average hourly earnings from August 2015 to August 2016. This has been a pressing issue in the national economy with wage stagnation prevalent among all industry sectors outside of energy. Although we have witnessed unemployment decrease to less than 5% during the recovery, there has not been the traditional 1-2% annual rise in wages. This discrepancy has impacted the recovery in terms of small business growth and job creation with household expenditures occurring at a lower rate than expected.
Real earnings indicate the purchasing power of money earnings after adjustment for changes over time in the prices of consumer goods and services. Factors that impact real earnings include consumer prices, increases in hours worked per week, and the general cost of living on a regional basis including housing and other pricing not included in the Consumer Price Index.
According to the BLS, real earnings data (those expressed in constant 1982-84 dollars) result from the adjustment of average hourly and weekly earnings by the BLS Consumer Price Indexes. In August there was a .2% increase in the CPI for all urban consumers. So although we see an increase year over year, from July to August this year there was actually a decrease in real average hourly earnings of .1%.
This recovery has presented a formidable challenge to classical economics, with unemployment, inflation, real wages, and purchasing power all behaving contrary to relationships we have seen for decades. This has further complicated factors for the Federal Reserve and potential impacts of interest rates. All these factors combined make one thing apparent, this is certainly a new era for capitalism and a new economy for all.
Alexandria M. Wright is the director Yavapai College Regional Economic Development Center, which provides analysis and services that facilitate economic development throughout Yavapai County and build wealth in our local communities.
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