Inflation-adjusted wages fell in June. A decline in hours worked makes it worse.
The BLS Real Earnings report for June shows inflation-adjusted wages declined.
All Employees
- Real average hourly earnings for all employees decreased 0.1 percent from May to June, seasonally adjusted.
- This result stems from an increase of 0.2 percent in average hourly earnings combined with an increase of 0.3 percent in the Consumer Price Index for All Urban Consumers (CPI-U).
- Real average weekly earnings decreased 0.4 percent over the month due to the change in real average hourly earnings combined with a decrease of 0.3 percent in the average workweek.
Production and Nonsupervisory Workers
- Real average hourly earnings for production and nonsupervisory employees were unchanged from May to June, seasonally adjusted.
- This result stems from a 0.3-percent increase in average hourly earnings combined with an increase of 0.3 percent in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
- Real average weekly earnings decreased 0.6 percent over the month due to the change in real average hourly earnings combined with a decrease of 0.6 percent in the average workweek.
Real Hourly Earnings Month-Over-Month
Real Hourly Earnings in 2025
The real private percent changes for January through June, in order, are: 0.0, 0.0, 0.4, -0.1, 0.3, and -0.1.
The production percent changes for January through June, in order, are: -0.1, 0.2, 0.2, 0.1, 0.2, and 0.0.
Those with a sudden propensity to annualize monthly numbers to brag about how well Trump is doing do not look so hot this month.
Real Hourly Earnings Year-Over-Year Percent Change
Year-over-year real wages are up 1.01 percent for all private workers and 1.30 percent for production and nonsupervisory workers.
This data has been rangebound since June of 2023.
Year-Over-Year CPI Jumps 0.3 Percentage Points to 2.7 percent
Earlier today, I reported Year-Over-Year CPI Jumps 0.3 Percentage Points to 2.7 percent
Month-over-month and year-over-year the CPI rose 0.3 percent.
Is the Next Fed Move a Cut?
I am not convinced the answer is yes, but currently I think so. Regardless, there is a wide range of outcomes including stagflation and an economic collapse.
If jobs stay firm and tariffs ignite inflation, the Fed might be temped to hike.
It’s important to understand no one knows what Trump will do with tariffs or how the market will react. That is how I see things and that is how the Fed sees it also.
Repeating past statements. There should not be a Fed. But the one thing worse than an independent Fed is one controlled by the president.
What’s With the Sudden Faith of Republicans in BLS Inflation Reports?
Yesterday, I asked What’s With the Sudden Faith of Republicans in BLS Inflation Reports?
Suddenly, MAGA supporters think inflation is low and guaranteed to stay that way.
These two BLS reports today show one hell of a lot of absurd cheerleading from some unexpected places.
This is not a red/blue issue. Its a productivity issue. I would argue that flat real wages for … well decades … has blunted the argument that American workers are too expensive, since relative to trade weighted wages they are likely way down.
The offshoring of the country’s manufacturing and industrial base has much more to do with an expensive regulatory environment than it does with wages. The regulatory environment has destroyed productivity, and has also increased labor costs considerably. So while workers are not seeing wage increases in their pay packet, they are seeing them in increased costs for paternity leave, safety, health care, “global warming benefits,” etc.
By voting for politicians that increase production costs through an overwhelming and inefficient regulatory structure, workers are determining that they would prefer this sort of stuff over cash wages.
I would argue that the main reason wages rose during Trump 1 was a curtailment of regulatory costs. I would also argue that the biggest lever the administration has to improve the economy right now is the regulatory lever.
Imagine having to rely just on wages to get by in life? That must be nigh impossible in 2025.
Real hourly earning y/y is up 1.45%, but hours/week are down.
Lower tax revenues, lower wages is not “Winning”…
SPX looks tired. Down 1,300. Up 1,500. The annual hi/lo range is 1,500. If SPX
retraces 382% (5,750), or 50% (5,600) it can go even higher in 2025. At 62% retracement (5,400) the trend is weak. SPX might exceeds July high. At 786% (5,150) the trend is very weak. Probably will not exceed July high. After 62%/78% retracement SPX might rise to a lower high, before breaching Apr low (4,835).
so… anything’s possible!
“If jobs stay firm and tariffs ignite inflation, the Fed might be temped to hike.”
That’s my base case. All eyes are on Aug 1. What will TACO do?
My bet is that he mostly goes through with tariff hikes but pulls back on the amounts.
The concerning thing is that even if he gets a “deal”, there may be significant tariffs involved, as in the case of Vietnam where the “deal” included a 20% tariff. Basically, Trump is a lose-lose situation for the American consumer.
Vietnam producers & exporters can eat most of a 20% tariff. 5-7% is probably all that will get passed onto consumers.
The main reason why there’s been no real attributable increase in inflation due to tariffs is because a lot of the tariff is being absorbed by foreign producers / exporter who are lowering their prices.
If prices are lowered to maintain market share, the tariffs cost really doesn’t get passed onto the consumer. The importer pays the savings as a tariff. No big deal.
But Trump & his advisors know that a big enough tariff will get passed onto consumers which is why I’m suggesting he’ll pull back on the amount of tariff.
New car prices fell in June? Why? It’s been reported that GM & Ford are eating the tariffs, because they can’t pass the price increase along to the consumer due to already sky high prices. So all that’s happening is their margins are getting eroded. Sucks for them, but they’re the one’s who like TACO always caves to UAW’s demands.
Taxes don’t get eaten by companies. They are always passed on to consumers, to workers and to investors. There is no free lunch.
The real reason behind tariffs is to provide a price floor for domestic companies. So if you increase the price of an imported shirt via a 20 percent tariff, even if only half of that is passed through it increases the price of the shirt by 10 percent plus margins. This increases the price floor for a company producing a shirt domestically by that same 10 percent plus margins. So in effect tariffs increase prices for both domestic and foreign goods.
They are in inefficient means of collecting taxes as well which is why economists since 1776 have been against their imposition. The Administration is following the ideas of Thomas Munn, not those of Adam Smith.
In the end tariffs will increase prices relative to the baseline, though they may increase wages on the margin domestically.
There isn’t a free lunch but governments are pros at “for a hamburger today I will gladly pay you Tuesday” time-shifting if costs.
Those record-in-peacetime government deficits mapped directly to record corporate profits as share of GDP.
Tariffs in practice serve as a rebalancing mechanism that reduces deficit at expense of corporate profits.
The as-yet-unsubstantiated claim that tariffs will mainly be paid by consumers is pro-corporate propaganda. Corporate and financial elites are “tariffied” of losing their record profits.
Agree on the cost shifting. Actually most of what is being recorded as “growth” in the flawed GDP figures is from net government borrowing.
That said, all taxes must be paid by someone. History would suggest that consumers will pay the bulk of them, while importers corporate profits and labor will take a hit as well. In cases where products are very elastically demanded it is possible that exporters will take a hit also, particularly if the tariffs are targeted (say just on coffee from Brazil but not from everywhere else). In those cases Brazilian exporters would be hurt if (and only if) there are other substitute sources, so Brazilian coffee exporters would lose at the expense of Columbian exporters who will be able to take an excess rent due to the setting of a price floor.
Thanks for your cogent ‘general equilibrium’ analysis. And I think you are spot on. The tax revenue collected (including tariffs) will be paid by a combo of consumers, workers or investors in the long run. And measured demand elasticity (which is very important for tariffs on specific countries or products) will tell us which of the three above will more likely bear the brunt of the tax.
And most importantly, your analysis is not rife with political hubris about tariffs. Just economic analysis; it’s refreshing here
Bought fresh tomatoes in Walmart. No price hikes on tomatoes and other stuff. Sale all over the place.
And as something very perishable (ie you can’t stock up) you’d expect to see prices rising as the dollar falls (10% since Jan 1st) and we import a lot of tomatoes from Mexico and other places.
Yet we aren’t and it’s not clear why.
POTUS PEDERAST knows what he’s doing. have faith fellow cult members.
Trump magic: advertisers flocked to Fox a conservative network with the highest rating. For years Mike the pillow ruled Fox. Jamie Diamon was twice on Maria Bartiromo this spring. Wall street whales kiss Trump’s ass.
Yesterday Trump and wall street whales were in PGH. Community organizers and a few Arabs protested in the streets: Timmy please, we lost our democracy.
It’s just getting started. Many of you thought the tariffs were just going to go away in two weeks, like Trump magic. Nope, we’re going to pay for them.
Here’s the new normal per AI: including both travel bans and tariff threats for 2025, the “stable genius” threatens 6 countries per week, on average.
What does AI really know anyway?
M*Vt = P*T is not gospel it is a formula
It is also totally 100 % meaningless .
I have written about this a dozen times.
Friedman assumed velocity was constant or at least relatively stable. Velocity is neither constant nor stable but it was relatively stable when he wrote MV = PT.
Velocity is a RESULT is does not cause or portend anything.
Velocity is a useless, inconsistent measure of something that has morphed over time yet never had an independent existence of its own.
Attempting to predict prices from velocity or velocity from prices is a fool’s mission.
Logical Proof of the Stupidity of Attributing Meaning to Velocity
Prices can rise with rising velocity
Prices can fall with rising velocity
Prices can rise with falling velocity
Prices can fall with falling velocity
MV=PT is a useless identity
No velocity or money stock measure acting alone is adequate as a guide post for monetary policy. AD = M*Vt.
Transactions velocity is an independent exogenous factor acting on prices and production. Whereas income velocity, Vi, an orthodox and contrived economic figure, a dependent endogenous figure, tells us nothing about the dynamics of money flows – because it measures neither the volume, or RoC <rate-of-change> of actual money flows. It is real means-of-payment money exchanging counterparties that affect price-levels, price trends, interest rates, employment, production, etc.
As Dr. Philip George puts it: “Changes in velocity have nothing to do with the speed at which money moves from hand to hand but are entirely the result of movements between demand deposits and other kinds of deposits”.
https://monetaryflows.blogspot.com/search?updated-max=2018-03-11T12:55:00-07:00&max-results=7&start=20&by-date=false
See: Juncture Recognition in the Stock Market by William G. Bretz
Bretz would correct Ed Fry’s errors on the G.6
See also, Bank Credit Analyst debit/loan ratio
What do you think happened in the 1st qtr?
This is the truistic measure of the transaction’s velocity of funds
https://fraser.stlouisfed.org/files/docs/releases/g6comm/g6_19961023.pdf
So what does it suggest?
It suggests you can take a simple idea and beat it to death until it is meaningless.
It’s no longer reported. I impute it. As you say income velocity is meaningless.
High interest rates and expectations of higher prices were both cause and effect of rising rates of Vt.
As Dr. Philip George says: “The velocity of money is a function of interest rates”
Take large CDs.
Large Time Deposits, All Commercial Banks (LTDACBM027NBOG) | FRED | St. Louis Fed
They’ve flattened out so Vt has stopped rising.
But bank credit continues to expand:
Bank Credit, All Commercial Banks (TOTBKCR) | FRED | St. Louis Fed
And the ratio of DDs to TDs is still increasing. So, no recession.
Derivates are awesome
Wonder what happened in ~ mid-‘80s ?
Hunker down explains a lot. You have an economy that is feeling over bought and needs a recession. You have a President who decides policy by gut feelings. TACO is not just a river in Egypt. You have a Fed that doesn’t know what to do because there are now more variables than their models are built for.
No recession beginning until January, at the earliest. The pork spending in the BBB is just too magnificent. 100% upfront depreciation, LOL!
Employees are afraid of losing their jobs as indicated by productivity increasing. Employers are able to survive by hiring people at lower wages than those leaving.
Yes, in spite of the illegal immigrant deportations and job losses. But somehow, wages can only increase if illegal immigrants are deported. In mathematics, this is called a, “proof by contradiction” that illegal immigrants are having little to no effect on the overall wage picture.