Sluggish Wage Growth Continues Throughout 2014
Today, the Bureau of Labor Statistics (BLS) released the Employment Cost Index (ECI), a closely watched measure of labor costs, for the last quarter of 2014. Nominal year-over-year compensation for private industry workers rose 2.3 percent, while private sector wages and salaries rose 2.2 percent.
To put these numbers in perspective, below is a chart of the year-over-year changes in both the ECI compensation and wage series along with the monthly BLS Current Employment Statistics (CES) nominal wage series for all nonfarm employees. It’s clear that nominal wage growth (using any of these measures) has been flat for a long time—and there’s little evidence this trend has changed in recent months.
The horizontal shaded area represents growth of 3.5 to 4 percent—nominal wage growth consistent with the Fed’s 2 percent inflation target and a stable labor share of income (given a range of 1.5 to 2 percent trend productivity growth).
We need to see consistent wage growth above this range before there is a hint of upward pressure on prices stemming from too-tight labor markets. Thus, the Fed should not even consider raising interest rates to forestall inflation until wage growth is consistently above this target.
Year-over-year change in private-sector nominal average hourly earnings, 2007–2014
| CES, all private | ECI, wages and salaries | ECI, total compensation | |
|---|---|---|---|
| 2007-03-01 | 3.6427146% | 3.5749752% | 3.1746032% |
| 2007-04-01 | 3.3234127% | ||
| 2007-05-01 | 3.7257824% | ||
| 2007-06-01 | 3.8575668% | 3.3431662% | 3.1465093% |
| 2007-07-01 | 3.4482759% | ||
| 2007-08-01 | 3.5433071% | ||
| 2007-09-01 | 3.2337090% | 3.4146341% | 3.1219512% |
| 2007-10-01 | 3.2778865% | ||
| 2007-11-01 | 3.3203125% | ||
| 2007-12-01 | 3.1113272% | 3.2945736% | 3.0038760% |
| 2008-01-01 | 3.1067961% | ||
| 2008-02-01 | 3.0464217% | ||
| 2008-03-01 | 3.0332210% | 3.1639501% | 3.1730769% |
| 2008-04-01 | 2.8324532% | ||
| 2008-05-01 | 3.0172414% | ||
| 2008-06-01 | 2.6666667% | 3.1398668% | 2.9551954% |
| 2008-07-01 | 3.0000000% | ||
| 2008-08-01 | 3.2794677% | ||
| 2008-09-01 | 3.2747983% | 2.9245283% | 2.8382214% |
| 2008-10-01 | 3.3159640% | ||
| 2008-11-01 | 3.5916824% | ||
| 2008-12-01 | 3.6303630% | 2.6266417% | 2.4459078% |
| 2009-01-01 | 3.5310734% | ||
| 2009-02-01 | 3.4725481% | ||
| 2009-03-01 | 3.1775701% | 2.0446097% | 1.8639329% |
| 2009-04-01 | 3.2212885% | ||
| 2009-05-01 | 2.8358903% | ||
| 2009-06-01 | 2.7365492% | 1.5682657% | 1.4814815% |
| 2009-07-01 | 2.5889968% | ||
| 2009-08-01 | 2.4390244% | ||
| 2009-09-01 | 2.2977941% | 1.3748854% | 1.1959522% |
| 2009-10-01 | 2.3383769% | ||
| 2009-11-01 | 2.0529197% | ||
| 2009-12-01 | 1.8198362% | 1.2797075% | 1.1937557% |
| 2010-01-01 | 1.9554343% | ||
| 2010-02-01 | 1.8140590% | ||
| 2010-03-01 | 1.7663043% | 1.4571949% | 1.6468435% |
| 2010-04-01 | 1.7639077% | ||
| 2010-05-01 | 1.8987342% | ||
| 2010-06-01 | 1.7607223% | 1.6348774% | 1.9160584% |
| 2010-07-01 | 1.8476791% | ||
| 2010-08-01 | 1.7070979% | ||
| 2010-09-01 | 1.8867925% | 1.6274864% | 2.0000000% |
| 2010-10-01 | 1.8817204% | ||
| 2010-11-01 | 1.6540009% | ||
| 2010-12-01 | 1.7426273% | 1.8050542% | 2.0871143% |
| 2011-01-01 | 1.9625335% | ||
| 2011-02-01 | 1.8262806% | ||
| 2011-03-01 | 1.8246551% | 1.6157989% | 1.9801980% |
| 2011-04-01 | 1.9111111% | ||
| 2011-05-01 | 2.0408163% | ||
| 2011-06-01 | 2.1295475% | 1.6979446% | 2.3276634% |
| 2011-07-01 | 2.2566372% | ||
| 2011-08-01 | 1.9434629% | ||
| 2011-09-01 | 1.9400353% | 1.6903915% | 2.1390374% |
| 2011-10-01 | 2.1108179% | ||
| 2011-11-01 | 2.0228672% | ||
| 2011-12-01 | 1.9762846% | 1.5957447% | 2.2222222% |
| 2012-01-01 | 1.7060367% | ||
| 2012-02-01 | 1.9247594% | ||
| 2012-03-01 | 2.1416084% | 1.8551237% | 2.1182701% |
| 2012-04-01 | 2.0497165% | ||
| 2012-05-01 | 1.7826087% | ||
| 2012-06-01 | 1.9548219% | 1.8453427% | 1.8372703% |
| 2012-07-01 | 1.7741238% | ||
| 2012-08-01 | 1.8630849% | ||
| 2012-09-01 | 1.9896194% | 1.8372703% | 1.9197208% |
| 2012-10-01 | 1.4642550% | ||
| 2012-11-01 | 1.8965517% | ||
| 2012-12-01 | 2.1102498% | 1.7452007% | 1.8260870% |
| 2013-01-01 | 2.1505376% | ||
| 2013-02-01 | 2.1030043% | ||
| 2013-03-01 | 1.8827557% | 1.7346054% | 1.9014693% |
| 2013-04-01 | 1.9658120% | ||
| 2013-05-01 | 2.0504058% | ||
| 2013-06-01 | 2.1729868% | 1.8981881% | 1.8900344% |
| 2013-07-01 | 1.9132653% | ||
| 2013-08-01 | 2.2118248% | ||
| 2013-09-01 | 2.0356234% | 1.8041237% | 1.8835616% |
| 2013-10-01 | 2.2495756% | ||
| 2013-11-01 | 2.1573604% | ||
| 2013-12-01 | 1.9401097% | 2.0583190% | 1.9641332% |
| 2014-01-01 | 1.9789474% | ||
| 2014-02-01 | 2.1017234% | ||
| 2014-03-01 | 2.1419572% | 1.7050298% | 1.6963528% |
| 2014-04-01 | 1.9698240% | ||
| 2014-05-01 | 2.0510674% | ||
| 2014-06-01 | 1.9599666% | 1.8628281% | 2.0236088% |
| 2014-07-01 | 2.0442219% | ||
| 2014-08-01 | 2.1223471% | ||
| 2014-09-01 | 1.9950125% | 2.2784810% | 2.2689076% |
| 2014-10-01 | 1.9510170% | ||
| 2014-11-01 | 1.9461698% | ||
| 2014-12-01 | 1.6549441% | 2.1848739% | 2.3450586% |
* Nominal wage growth consistent with the Federal Reserve Board's 2 percent inflation target, 1.5 percent productivity growth, and a stable labor share of income.
Source: EPI analysis of Bureau of Labor Statistics Current Employment Statistics (CES) public data series and Bureau of Labor Statistics Employment Cost Index (ECI)
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