EJ Antoni writes:
Today’s employment data showed further gains in earnings, but cumulative price increases have still far outpaced earnings growth over the last 4 years.
According to the Household Budget Index, it’s even worse when just considering prices for things you have to buy, i.e., food, housing, etc.
Once again, I cannot verify Dr. Antoni’s conclusions. I use FRED’s AHETPI series, which is for all production and non-supervisory workers. Then, recalling the CPI tends to overstate inflation in part because it’s a Laspeyres index (although less so over time), I deflate using a variety of deflators.
Figure 1: Average hourly earnings of production and nonsupervisory workers in private sector deflated by CPI-U (blue), chained CPI (tan), PCE deflator – market based (green), and AIER Everyday Price Index (red), all in 2021M01$. November CPI deflated wage uses Cleveland Fed y/y nowcast as of 12/7/2024. Chained CPI seasonally adjusted by author using X-13. Source: BLS, BEA via FRED, Cleveland Fed, AIER, and author’s calculations.
Dr. Antoni focused on the Primerica HBI to make his case. I rely on the American Institute for Economic Research’s (AIER) “Everyday Price Index” which has the same objective of covering necessities. One can see real average hourly earnings using this metric is even higher than using the CPI-U.
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