If you were just watching paychecks, the situation might seem bright. Average hourly pay for workers–called “production and nonsupervisory” employees in government statistics–grew 0.6 percent in January compared with December. Compared with a year ago, averaged hourly earnings are up 5.3 percent. So are happy days here again? Not at all. Over the past year, the consumer price index for what the government calls “all urban wage earners and clerical workers” has jumped 8.3 percent.
The result, average hourly earnings has fallen 1.3 percent after inflation. On a monthly basis, real earnings were flat from December to January. The situation is even bleaker on an average weekly earnings basis.
The average number of hours worked has fallen by 1.5 percent over the past 12-months. As a result, real average weekly earnings are down 2.7 percent since last January and they fell 0.6 percent in January. If we expand our analysis to include all workers, we see that real average hourly earnings are down 1.7 percent over the past 12 months and average weekly earnings are down 3.1 percent. On this broader measure, average hourly earnings improved 0.1 percent from December but weekly earnings fell 0.5 percent because average hours fell. Why did the workweek contract in January? The omicron surge likely played a large role. Many workers probably missed work because of quarantine rules after either testing positive or having close contact to someone who tested positive. And in some businesses, hours were likely cut because business was slow due to customers quarantining or avoiding public places. When inflation first picked up, many analysts and establishment media outlets claimed that a silver-lining would be higher income. Unfortunately, earnings have failed to keep up with inflation, so the lining was rusty and sharp, cutting into household spending power and infecting family finances with economic tetanus.
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