The BLS report on Productivity and Costs for the Second Quarter 2018 shows that despite productivity increase, real wages are declining.

Nonfarm business sector labor productivity increased 2.9 percent during the second quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 4.8 percent and hours worked increased 1.9 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.)

From the second quarter of 2017 to the second quarter of 2018, productivity increased 1.3 percent, reflecting a 3.5-percent increase in output and a 2.2-percent increase in hours worked.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in the nonfarm business sector decreased 0.9 percent in the second quarter of 2018, reflecting a 2.0-percent increase in hourly compensation and a 2.9-percent increase in productivity. Unit labor costs increased 1.9 percent over the last four quarters.

Real Hourly Earnings

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The data series for total private wages started March 2007. As per BLS procedure, I deflated earnings for all employees by CPI-U and nonsupervisory workers by CPI-W.

Both measures of CPI dramatically understate actual CPI by failure to properly factor in housing. The result has been devastating for anyone wishing to buy a house, and more generally, anyone not owning assets (stocks, bonds, real estate).

Want to buy a starter home? Forget about it.

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Placing the Blame

Looking for someone to thank (for the bubble) or blame (for inability to buy a house)?

Look no further than the Fed for its bubble-blowing policies.

Mike "Mish" Shedlock

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