Four More Items in the Wages Outpacing
Prices Debate
Photograph Source: Mr. Blue MauMau – CC BY 2.0
Ben Casselman had a useful piece in the New York Times examining the extent to which wages have outpaced prices since the pandemic. While he notes that for most people, they almost certainly have, there are people for whom this is likely not the case.
In fact, this will always be the case, even in the best economy, which arguably is what we are seeing now, or at least best in half a century. But there are some additional points to the ones Casselman raised that are worth keeping in mind.
Low Wage Workers’ Wages Outpaced Food Inflation
First, Casselman notes that not everyone consumes the same basket of items. For lower income people, food is a larger share of their budget and food prices have risen more than the overall rate of inflation since the pandemic.
This is true, but it is important to keep in mind that the lowest paid workers have seen the largest wage gains since the pandemic. To take an example, non-supervisory workers in hotels and restaurants had a 32.0 percent increase in their average hourly pay from before the pandemic. Their pay averaged $14.92 an hour in February of 2020. It had risen to $19.69 an hour in September of this year.
That easily outpaced the 25.8 percent increase in food prices. No one would try to claim that someone earning $19.69 an hour today is doing well, but they are doing better than the person earning $14.92 an hour at the start of 2020. It would be hard not to score this person as being better off.
14 Million Homeowners Refinanced Their Mortgages
Casselman notes that the widely derided increase in house prices has not been bad news for everyone. Specifically, the two-thirds of households that own their home might actually be feeling pretty good that the value of their house has risen.
However, there is another aspect to this picture that is also worth noting. More than 14 million homeowners refinanced their mortgages, taking advantage of the low mortgage rates we saw from the start of the pandemic until the Fed began raising rates in March of 2022.
Those that didn’t borrow additional money with a cashout refinance are saving an average of $2,500 a year in interest payments. That would be a big deal for a family with an income around $80,000. For some reason these savings for a large number of middle-class families rarely get mentioned in discussions of people’s well-being.
The Number of People Working from Home Has Increased by Almost 20 Million Since the Pandemic
Working from home exploded during the pandemic. While it has fallen somewhat since the peak months of the shutdown period, the number of people working remotely is nearly 20 million more than the pre-pandemic number. This increase is nearly one-eighth of the workforce.
These people are saving thousands of dollars a year in commuting costs and other expenses associated with working in an office. They also are saving hundreds of hours a year in commuting time. Any assessment of whether we are better off would need to factor in the impact of the increased opportunity to work from home.
Consumers’ Buying Patterns Tell Us They Feel Better Off
One way to find out how people feel about the economy is to ask them. Another way is to see what they do.
The answers to the first question can be somewhat ambiguous (almost everyone seems to feel they are doing much better than the rest of the country). The answer to the second question is less ambiguous.
We see people buying more of just about everything. We have seen record levels of air travel in the last year. We also saw record levels of road travel on the summer holiday weekends.
We know numbers can be skewed by the buying patterns of a small number of rich people, but that story is hard to tell here. Wealthier people do fly disproportionately, but with peak summer travel nearing 3 million flights a day, we are looking far beyond the one percent. That story is even more clear with road travel, with more than 60 million people hitting the road on holiday weekends this summer.
We can also look to other areas of non-necessary spending that have seen big increases since the pandemic. Purchases of televisions was 79 percent higher in the third quarter of this year than in the last quarter before the pandemic. (This is quality adjusted, so it does not mean 79 percent more TVs.)
Inflation-adjusted purchases of restaurant meals was 10.5 percent higher last quarter than before the pandemic. Purchases at fast-food restaurants was 10.1 percent higher last quarter than before the pandemic. It’s hard to believe that the rich are driving spending at McDonalds and Subway.
In short, if we look at what people are spending, they do seem to be considerably better off than before the pandemic. Again, this is not true for everyone. Some people have lost jobs and are now forced to work for lower pay. Some people have become disabled and may be able to work less (often because of the pandemic), or not at all. But if we are trying to look at the big picture, consumption patterns seem to be telling us that people feel they are better off today than they were before the pandemic.
This first appeared on Dean Baker’s Beat the Press blog.
ADP: Private sector creates 233,000 jobs in October, surpassing expectations
ADP's monthly National Employment Report showed that private payrolls added 233,000 jobs in October. Photo by Jim Ruymen/UPI | License Photo
Oct. 30 (UPI) -- Private payroll growth in October exceeded Wall Street expectations, ADP said in its monthly report Wednesday.
The National Employment Report showed that private companies added 233,000 jobs to the economy in October for their best showing in more than a year.
The report said the private non-farm jobs topped the Dow Jones forecast of 113,000 jobs created and comes despite Hurricane Helene and Hurricane Milton ravaging the Southeast over the same period. It was the best job-creation report since July 2023.
The total was more than the revised total of 159,000 jobs created in the private sector in September.
Companies with more than 500 employees led the hiring surge, adding 140,000 jobs to their payrolls. Education and health services created 53,000 jobs in October, while the trades, transportation, and utility sector added 51,000 jobs, followed by the construction and leisure and hospitality sectors which added 37,000 jobs each.
"Even amid hurricane recovery, job growth was strong in October," Nela Richardson, ADP chief economist said in a statement. "As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient."
By AFP
October 30, 2024
Economists expect the US economy to grow by an annual rate of 3.0 percent in the third quarter, according to a consensus forecast - Copyright AFP/File Frederic J. BROWN
Beiyi SEOW
The US economy is set to report another quarter of solid growth Wednesday, less than a week before the presidential election, but analysts say it remains unclear if positive data can sway inflation-weary voters.
Despite spending more, American consumers have been downbeat about their job and financial prospects — meaning that Democrat Kamala Harris still comes out behind Republican Donald Trump in opinion polls about the economy.
“If you were to look at numbers like GDP growth or income or consumption, or even employment, you’d say: ‘Gosh, this economy is in pretty good shape,'” said Dan North, senior economist for Allianz Trade North America.
“The one thing that completely destroys that narrative is the inflation that consumers have had to deal with,” he told AFP.
The world’s biggest economy is anticipated to expand by an annual 3.0 percent rate in the third quarter, according to a market consensus published by Briefing.com.
This is the same pace as the April-June period — and US growth this year is due to outpace other advanced economies like Germany, France and the United Kingdom, according to recent International Monetary Fund estimates.
Driving growth is again strong consumption, economists say, with business investment providing additional support.
But Americans remain pessimistic about their financial bottom line.
An October New York Times/Siena College poll of likely voters released last week showed that economic issues remained top-of-mind around two weeks before the election.
Those polled were slightly more inclined to trust Trump to do a better job handling the economy, with 52 percent of respondents preferring him to 45 percent support for Harris.
– Inflation ‘hard to swallow’ –
North explains that as compared with January 2021, when price increases started ballooning, wages have cumulatively grown 18 percent.
But households have had to contend with larger overall upticks on expenses such as food, shelter and gasoline — with cost increases ranging from 22 percent to 29 percent.
This is likely the reason that voters feel the economy is doing poorly despite job and wage growth, alongside relatively low unemployment levels.
“Does the man on the street care if GDP is 2.8 or 3.1? No, they want to know how the inflation is affecting them,” said North. “It’s been pretty hard to swallow over the past few years.”
Workers may have had 17 months of positive real wage growth, but they had 25 months of negative growth prior to that, ZipRecruiter chief economist Julia Pollak noted.
With workers accustomed to positive wage growth prior to the coronavirus pandemic, many still feel like their salaries need to catch up, she added.
– Overreliance on credit –
Consumers are also turning to credit cards and dipping into their savings to fund spending, piling pressure especially on lower-income households and younger people.
Economists point to higher credit card delinquencies in recent years.
Credit card delinquency rates hit a near 12-year high in the first quarter this year, according to a report published in July by the Federal Reserve Bank of Philadelphia.
On Wednesday, the biggest support to GDP growth will be from consumer spending, with business investment set to “pack another positive punch,” said Oxford Economics deputy chief US economist Michael Pearce.
“Election uncertainty could shave some off business investment in the fourth quarter, but the effects are not normally that large,” Pearce told AFP.
He added that the GDP growth figure is unlikely to sway the Federal Reserve’s interest rate decision next week.
On the flipside, manufacturing lost 19,000 jobs in October while small businesses with 20-49 employees contracted 6,000 jobs. Those small business losses, however, were absorbed by the businesses with 1-19 employees, which created 10,000 jobs this month.
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