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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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June 05, 2015


Atlanta Fed's Wage Growth Measure Increased Again in April

A measure of 12-month wage growth constructed here at the Atlanta Fed increased by 3.3 percent in April. This rate is up from 3.1 percent in March and at its highest level since March 2009 (see the chart).

 

As mentioned in an earlier macroblog post, this measure behaves broadly like the wage and salary component of the Employment Cost index (ECI). The ECI data pertain to the last month in the quarter and are published with about a four-week lag. In contrast, the Atlanta Fed measure uses individuals' hourly wage data, 12 months apart, from the Current Population Survey (CPS). The data come from publicly available CPS microdata produced by the U.S. Bureau of Labor Statistics (BLS) and are typically released two or three weeks after the monthly BLS labor report.

Timeliness is one thing, but is it useful? It turns out there is a relatively strong correlation between this wage growth measure and the employment rate (100 minus the unemployment rate) lagged by 12 months (see the chart).

 

At least in terms of this measure of wage growth, it seems that improvement in labor utilization is translating into rising wage growth. This development is something our boss, Atlanta Fed President Dennis Lockhart, has been looking for. We expect to be able to update this wage growth measure with the May CPS data in a few weeks.

Photo of John Robertson
By John Robertson, a senior policy adviser in the Atlanta Fed’s research department

June 5, 2015 in Employment , Labor Markets , Wage Growth | Permalink

Comments

"It turns out there is a relatively strong correlation between this wage growth measure and the employment rate."

Didn't Keynes say this nearly 80 years ago? Of course Keynes is "old school" so his observations are necessarily outdated.

Posted by: Paul Mathis | June 05, 2015 at 05:49 PM

It seems that the improvement in the labor market appears to lag the improvement in wages. You would think that it should be reversed, an increase in employment leads to improved wages

Posted by: Ayelet | June 07, 2015 at 10:18 AM

@Ayelet - I think it shows the increase in wages lags the improvement in the employment rate which is what is expected by theory and gives confidence that the continuing improvement in employment should lead to more increases in wages. Given this data would be interesting to see include labor productivity in the analysis as a perceived problem in both the US and UK recovery has been the lack of productivity gains leading to concerns that the long-term potential growth rate has been reduced

Posted by: Oliver Bunnin | June 09, 2015 at 03:47 AM

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