Real Wages Plummet as Inflation Hits the US Recovery

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Assessment: No US citizen should be happy about plummeting real wages and stagnant labor participation in the middle of a strong recovery and the second-largest deficit on record …

The headline 3.9 percent unemployment rate looks positive, but job creation fell significantly below consensus, at 199,000 in December versus a consensus estimate of 450,000.

The weak jobs figure should be viewed in the context of the largest stimulus plan in recent history. With massive monetary and fiscal support and a government deficit of $2.77 trillion, the second highest on record, job creation falls significantly short of previous recoveries and the employment situation is significantly worse than it was in 2019.

“When the righteous are in authority, the people rejoice;
But when a wicked man rules, the people groan.” Proverbs 29:2

The most alarming datapoint is that real wages are plummeting. Average hourly earnings have risen 4.7 percent in 2021, but inflation is 6.8 percent, sending real wages to negative territory and the worst reading since 2011.

The number of persons not in the labor force who currently want a job did not change in December, at 5.7 million. This is still 717,000 higher than in February 2020.

The number of long-term unemployed (those jobless for twenty-seven weeks or more) remains at 2 million in December, or 887,000 higher than in February 2020. Long-term unemployed accounted for 31.7 percent of unemployed, according to the Bureau of Labor Statistics.

The headline 3.9 percent unemployment rate looks positive, but job creation fell significantly below consensus, at 199,000 in December versus a consensus estimate of 450,000.

The weak jobs figure should be viewed in the context of the largest stimulus plan in recent history. With massive monetary and fiscal support and a government deficit of $2.77 trillion, the second highest on record, job creation falls significantly short of previous recoveries and the employment situation is significantly worse than it was in 2019.

The most alarming datapoint is that real wages are plummeting. Average hourly earnings have risen 4.7 percent in 2021, but inflation is 6.8 percent, sending real wages to negative territory and the worst reading since 2011.

The number of persons not in the labor force who currently want a job did not change in December, at 5.7 million. This is still 717,000 higher than in February 2020.

The number of long-term unemployed (those jobless for twenty-seven weeks or more) remains at 2 million in December, or 887,000 higher than in February 2020. Long-term unemployed accounted for 31.7 percent of unemployed, according to the Bureau of Labor Statistics.

The headline 3.9 percent unemployment rate looks positive, but job creation fell significantly below consensus, at 199,000 in December versus a consensus estimate of 450,000.

The weak jobs figure should be viewed in the context of the largest stimulus plan in recent history. With massive monetary and fiscal support and a government deficit of $2.77 trillion, the second highest on record, job creation falls significantly short of previous recoveries and the employment situation is significantly worse than it was in 2019.

The most alarming datapoint is that real wages are plummeting. Average hourly earnings have risen 4.7 percent in 2021, but inflation is 6.8 percent, sending real wages to negative territory and the worst reading since 2011.

The number of persons not in the labor force who currently want a job did not change in December, at 5.7 million. This is still 717,000 higher than in February 2020.

The number of long-term unemployed (those jobless for twenty-seven weeks or more) remains at 2 million in December, or 887,000 higher than in February 2020. Long-term unemployed accounted for 31.7 percent of unemployed, according to the Bureau of Labor Statistics.

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