March 07, 2015
You may have heard reports on Friday’s jobs numbers saying that wage growth slowed sharply from January. It did not.
As I point out each time this becomes an issue, the data on hourly wage growth are highly erratic. This means the change from one month to the next is largely driven by errors in the data. Since errors do not tend to repeat in the same direction, a sharp uptick is likely to be followed by a sharp downtick and vice-versa. This pattern should be familiar to any economist or economic reporter who deals with the topic regularly.
For this reason, I largely ignore the monthly changes. I take the average wage for the last three months and compare to the average for the prior three months. If we do this with the February data we get an annualized rate of wage growth of 1.8 percent. That’s down slightly from the 2.0 percent rate over the last year. I wouldn’t make much of the slowdown, but there certainly is no case for an acceleration of wage growth, nor was there in November, December, or January.
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