US living standards continue to crawl ahead, by half a cent in the dollar during the year to August 2018.
Official figures showed a 0.5% increase in real – in other words inflation-adjusted – weekly earnings over the 12-month period.
But only 0.2 percentage points of this resulted from hourly wage growth. The other 0.3 percentage points arose because of a 0.3% increase in the length of the average working week.
Jobs boom bought with stagnant real earnings
The sluggish improvement in real pay is the other side of the coin of America’s jobs miracle. Unemployment currently stands at 3.9% of the workforce, well below the definition of maximum employment thought to be used by America’s central bank, the Federal Reserve, of 4.5%.
Current labour-market buoyancy is reminiscent of the pre-crisis employment boom, when the Fed chairman Alan Greenspan said that any American who wanted a job could have two of them.
But in order to price themselves into work, Americans have had to accept stagnant or even falling real wages.
These latest figures, from the Bureau of Labor Statistics, contain a sub-set covering production workers and what are known as non-supervisory employees, those without any responsibility for other employees. Here, real average hourly earnings were unchanged between July and August, seasonally adjusted.
Rise in inflation USA
This was the result of a 0.3% rise in earnings being negated by a 0.3% rise in US inflation. There was no change in average weekly hours.
In the 12 months to August, real average hourly earnings in this sub-set fell by 0.1%. However, a 0.6% increase in the average working week resulted in a 0.5% rise in average weekly earnings.
Within the all-items figure, food prices rose by 2.7% during the 12 months, while energy costs were 10.2% higher. There was a 20.3% rise in gasoline prices and a 30.9% jump in the cost of fuel oil.
But there was better news for consumers in electricity prices, down 0.5% over the year, and gas piped to the home, where the rise was just 0.1%.
Booming employment and above-target inflation makes more likely a further interest-rate rise from the Fed. In December 2008, the range for the key federal funds rate was cut to an emergency level of 0%-0.25%, but as the economy has strengthened this has been gradually increased, starting in December 2016, to the current range of 0.75%-2%.
The next announcement on monetary policy from the Fed will come on 26 September. President Donald Trump has suggested the Fed, which is independent, ought to consider the effect of rate hikes in pushing up the value of the dollar, making it easier for countries, such as China, to import goods into the US.