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
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
While my heart agrees with Mish on home prices being ridiculous, I do believe that OER is the right measure because (1) including house prices would overstate CPI for people like me who own homes, and (2) house prices in many areas are high because they embed a speculative component of appreciation, which does result in a truly better deal (ie, not understated) rent CPI for renters. That minor point aside, I think the Fed’s low interest rate policy is indefensible.
It’s easy to blame everything on the FED, but the money supply has to keep growing. Otherwise, money would become scarce as the population increases. The money supply has to increase in accordance with interest rates also, otherwise if would be very difficult to repay the majority of debts that charged interest. If we had a fixed money supply, everything in aggregate would be in deflation, which would be devastating for asset holders and would greatly decrease any incentive to invest.
Is it bad for the FED to bail out bad actors? Yes. But that doesn’t mean everything they do is bad.
“Otherwise, money would become scarce as the population increases.”
Or, gosh dolly, people would have to, like, learn decimal math and stuff…
“…otherwise if would be very difficult to repay the majority of debts that charged interest.”
As in, the majority of the, what is it by now? 1 quadrillion worth of debt? Now, what a tragedy that would be. The world is obviously suffering from far too few incentives to mindlessly create debt. Too little debt… now that is the world’s current problem….
A fixed money supply, is no different than a fixed Meter. Rather than one who increases every year, to prevent the average height of a conscript male from increasing as time goes by. Or a fixed Kilo. Instead of one who keeps growing, so that farmers have to give up ever more cows to hand over the “same” amount of meat to the taxman, so that he can feed his ever taller, “same height as before” conscripts….
Fixed measures are good. They allow accurate comparisons. And, they allow everyone to know what they have got. That’s why they are used everywhere anyone cares about accurate measurements. And are only poo-pooed by those who wants to obfuscate the fact that the measures are being changed and manipulated to serve the agenda of those privileged to do the changing.
Every real, economic, resources is, at any given time, always used for something. They are either used for current consumption, or they are used to increase future consumption, aka invested. No resource is used for neither, as a “resource” with no utility to anyone for any purpose, will see no demand, hence falling in price until it is cheap enough that someone either feels like consuming it, or reckons he can use it for an investment.
Simply printing Washington’s face on paper pieces, nor adding zeros to a number in an Excel sheet, doesn’t somehow alter the amount of real resources available. Hence, the only way printing money can increase investment, is by reducing consumption. How do you reckon printing money accomplishes that: Reducing consumption….?
Once again, you blame the Fed, instead of Congress, who approves all of the deficit spending, that often lands in the hands of donors. What bank is going to turn down a loan to the US govt?
The other branch that deserves more blame than the Fed is the Judicial system that has destroyed the rule of law. Without an unbiased rule of law, and maximum freedom, you cannot have free-market capitalism, and the USA as the Constitution intended.
This is NOT the fault of the Fed. Who took away and never returned the charter of the Fed, to lend to corporations during economic contractions instead of the Federal govt? Yea, that’s also CONgress!
How can you possibly defend a monetary policy designed to benefit less than 1% of the population, while they simultaneously blow bubbles meant to stimulate speculative gains and nothing else? What part of privatizing profits while socializing losses do you enjoy?
Fed policy is designed to be as irresponsible as possible because they know we will follow the too-big-to-fail playbook until everything comes crashing down.
This isn’t meant to defend the legislative or judiciary branches, who long ago stopped caring about regular Americans. Not giving a damn is still much better than actively trying to grind them into dust like the Fed is doing.
The Fed are the ones printing the money driving this theft racket. Get rid of it, replace it with nothing at all similar, and you’re back to what you had before that whole idiocy it underpins got underway: A proper, Gold backed dollar.
Of course, Congress is to blame as well. For The Fed, income taxes, gun laws, drug laws, alcohol laws, and all the rest of the laws they have enacted that extend past the most narrow interpretation of Government’s enumerated powers. Basically, for absolutely everything they have done since the country’s founding as what was supposed to be a somewhat free society.
And the Judiciary as well. For absolutely every pile of nonsensical “reinterpretation” of the Constitution. Starting with, and most absolutely including, the whole Fire in a crowded theater drivel they had no business even being aware of, much less offer an opinion about.
But the fact that the entire rest of government is strictly worse than a smoking crater engulfing all of them would be, doesn’t somehow make the Fed any different. It’s not as if any of them are of any use whatsoever, as currently constituted.
more money for buybacks….
And 90% of the voters have no clue or are happy about it cause they own stocks, bonds, or real estate.
More likely they are just fools.