Typical families respond to inflation by taking on additional debt or second jobs to maintain spending levels. There are signs that debt service is becoming a problem. The inflation we’re experiencing could trigger interest rate increases, which will cause even more problems with debt service. We’ve had fifty years of fiscal policies that benefit the wealthy at the expense of all others (lower income tax rates, lower capital gains tax rates, higher exemptions from inheritance taxes). We’ve had 40+ years of rulings from the Supreme Court that tip the balance of bargaining power to employers. The middle and working classes have been stretched to the point where modest inflation and modest interest rates (6% mortgage rates are not that high on a historical basis) cause meaningful problems. Now, we have moderate inflation and moderate interest rates and we’re about to have major problems.
There is another explanation for strong jobs and weak earnings that I havent seen anyone consider. This may be completely wrong, but I would love feedback.
What if there has been a tonne of informal jobs moved into the formal sector? Since these would be at the bottom of the pay scale, it would explain both issues simultaneously, as well as explain why job growth is actually inflationary. If one million undocumented workers left the country, it could certainly explain all of the recent numbers.
Interesting question. Could be in play, but there are two other large forces in play, which push in opposite directions. First, if "one million undocumented workers left the country," the contraction of labor supply would put upward pressure on wages, all else equal. But all else is, of course, not equal (this next part is what Stephen Miller doesn't get). Those missing folks don't just create supply, they create demand as well.
It would put upward pressure on overall wages (formal and informal), but since those wages were previously informal, then including those wages in the formal sector would provide a fall in average wages within the formal sector.
“…they create demand as well”. Yes! It’s as though employers have adopted a business model of firing their customers. And at the policy level there seems to be a blind spot when it comes to a minimum wage: every nickel earned at the lower end of the labor pool gets pumped right back into the economy.
1) Policy matters, 2) Politicians who talk about policy will be disdained by our mainstream political media for boring them. Just ask Hillary, Gore, etc.
The BLS page "average weekly earnings for production and nonsupervisory workers" shows a 5.6% gain between Dec. 2019 and March 2026. That's for 6.25 years. Not much real gain. If I look at exactly 6 years back, March 2020 to March 2026, the gain is 4.3%. The nonsupervisory worker makes up 82% of all workers.
The Covid layoffs spiked the average for a while, but it returned to the norm after about 2 years.
The Fed FRED page shows "Compensation wages and salaries" that takes in more than nonsupervisory workers, it's up 9%. In the same 6 plus years corporate profits are up 46%, and the BEA shows national income up 41%. The S&P 500 increased by 71%.
I looked at the new Flow of Funds report and Table 1 shows "corporate equities and mutual funds" growing in value by 60% between 2022 to 2026 Q1, from $40.4 tr to $64.8 tr.
I calculated that the top 10% collectively gained about $1.2 million a year for all 14 million households. I combined the unrealized capital gains with the average income for the top 10%, taking the income figures from RealTime Inequality (produced by Univ. of California Berkeley economists).
Most of that gain went to the top 1% not to the lower 90 to 99 percentiles.
I also used the Fed's Distributional Financial Accounts page for the "corporate equities and mutual fund shares" amounts (87.4% of all stock is owned by 10% of households). Total stocks increased in value by 97% over 6 years, from $29.26 trillion to $59.68 trillion. I added the 87.4% of that value ($30 some tr) onto the the top 10%'s income over 6 years, and divided by 6 for a yearly average of unrealized gains of $554,000 per household among 14 million households.
RealTime shows an average income for the top 10% of $641,000. Plausibly each of the 14 million Hh saw a gain of $1.2 million per year. That's amazing.
The BLS page shows average weekly earnings for the nonsupervisory workers, it grew from $53,456 in 2019 to $56,454 in 2026, almost by $3,000 over 6 years. I may have made some errors, I'm an amateur. But I would guess I'm painting a picture that's close to accurate.
My conclusion before I started the calculation was that the lower-earning 90% were getting a raw deal, the shaft, you name it. I figure pretty soon stuff like this will hit the electorate, and we'll see some demands for change. The RealTime Inequality page shows a shift in income distribution of 15.4% between 1976 and 2023 from the lower-90% to the top 10%. That's in the range of $30,000 per year that once went to every household in the lower 90% now going to the top 10%.
The EPI has data like this too, the RAND corporation also.
It's mostly war-driven inflation, but it's not only that.
Jared Bernstein
Jun 12
READ IN APP
"We’ll see if the most recent round of negotiations to end Trump’s war-of-choice in Iran is truly taking hold. Spokespersons from both sides have zero credibility."
You are too kind. One side at least has negative credibility.
Sort of on topic here, since we're on how workers are doing and their sentiment, I have a comment on the "Vibcession" debate between JB and Paul Krugman, with others chiming in from time to time.
(I realize that debate may or may not have completely fizzled out.)
So, in his arguments, I noted that Prof. Krugman has used an analysis category "low-information voter" (defined in his case as a person who doesn't know which party controls Congress) as a basis for his voter-sentiment analyses.
I happened to bump into that this very same term was used by Rush Limbaugh some years back.
I'll bet Prof. Krugman doesn't know that, or he wouldn't have chosen that term!
If he finds out, this might be impetus for his switching to an alternative concept of "voter with little or no critical thinking skills", which is a related, but somewhat different concept.
(Whether the category is taken as a whole, or split into "voters with little in the way of critical thinking skills", and "voters with no critical thinking skills at all", or course, should be decided at the whim of the statistician computing the numbers. (😊))
--
Actually, a bit more seriously, if he wants to stay with something that assesses whether a person has a property which we believe is their fault for not having, like having acquired certain basic information, I might use a definition like whether a person knows that, in the 10 Republican states that have chosen not to expand Medicaid, if the state did expand Medicaid, (and therefore gave numerous people below 100% of the Federal Poverty Level an option for affordable health insurance that they now do not have), 90% of the costs of the medical bills would be borne by the federal government, not the state.
(However, I really can't get away from adding a critical-thinking-skills component. We also have to know, if the person does know that, whether they can figure out by some amount of reasoning, at least roughly, what the likelihood is that they themselves, or their family members or friends, will wind up in the future in such straits as to have no option, besides that expanded Medicaid, for any health coverage they can possibly afford at all.)
I think it was G. Elliot Morris who observed that Harris would have won handily if the voter pool consisted only of people who watched or read the news more than once a month. But then there’s the phenomenon of people who know which party controls Congress, know exactly what’s going on in Washington, and feel first hand the rising cost of living — “but you don’t expect me to vote Democrat, do you?” I’m not sure this can be entirely chalked up to a deficit in critical thinking skills or that the vibecession necessarily portends a massive shift away from the GOP.
Clesrly our Mad King has no connection to the reality his subjects face . Once inflation becomes embedded into pricing expectations , we are in for something that will be difficult to control . Praise be to the Biden Administration for the ability to make a “ soft landing “ out of the supply shock stemming from Covid . We cannot trust the corrupt regime to be able to achieve a soft landing when they wrecked the runway with tariffs , ill begotten war , and out of control fiscal deficits .
Might be worth running the CPI without fuel. Wonder in the nominal wage slowdown is about sectoral composition of recent job growth…
Typical families respond to inflation by taking on additional debt or second jobs to maintain spending levels. There are signs that debt service is becoming a problem. The inflation we’re experiencing could trigger interest rate increases, which will cause even more problems with debt service. We’ve had fifty years of fiscal policies that benefit the wealthy at the expense of all others (lower income tax rates, lower capital gains tax rates, higher exemptions from inheritance taxes). We’ve had 40+ years of rulings from the Supreme Court that tip the balance of bargaining power to employers. The middle and working classes have been stretched to the point where modest inflation and modest interest rates (6% mortgage rates are not that high on a historical basis) cause meaningful problems. Now, we have moderate inflation and moderate interest rates and we’re about to have major problems.
There is another explanation for strong jobs and weak earnings that I havent seen anyone consider. This may be completely wrong, but I would love feedback.
What if there has been a tonne of informal jobs moved into the formal sector? Since these would be at the bottom of the pay scale, it would explain both issues simultaneously, as well as explain why job growth is actually inflationary. If one million undocumented workers left the country, it could certainly explain all of the recent numbers.
Interesting question. Could be in play, but there are two other large forces in play, which push in opposite directions. First, if "one million undocumented workers left the country," the contraction of labor supply would put upward pressure on wages, all else equal. But all else is, of course, not equal (this next part is what Stephen Miller doesn't get). Those missing folks don't just create supply, they create demand as well.
It would put upward pressure on overall wages (formal and informal), but since those wages were previously informal, then including those wages in the formal sector would provide a fall in average wages within the formal sector.
“…they create demand as well”. Yes! It’s as though employers have adopted a business model of firing their customers. And at the policy level there seems to be a blind spot when it comes to a minimum wage: every nickel earned at the lower end of the labor pool gets pumped right back into the economy.
1) Policy matters, 2) Politicians who talk about policy will be disdained by our mainstream political media for boring them. Just ask Hillary, Gore, etc.
The BLS page "average weekly earnings for production and nonsupervisory workers" shows a 5.6% gain between Dec. 2019 and March 2026. That's for 6.25 years. Not much real gain. If I look at exactly 6 years back, March 2020 to March 2026, the gain is 4.3%. The nonsupervisory worker makes up 82% of all workers.
https://data.bls.gov/timeseries/CES0500000031
The Covid layoffs spiked the average for a while, but it returned to the norm after about 2 years.
The Fed FRED page shows "Compensation wages and salaries" that takes in more than nonsupervisory workers, it's up 9%. In the same 6 plus years corporate profits are up 46%, and the BEA shows national income up 41%. The S&P 500 increased by 71%.
I looked at the new Flow of Funds report and Table 1 shows "corporate equities and mutual funds" growing in value by 60% between 2022 to 2026 Q1, from $40.4 tr to $64.8 tr.
I calculated that the top 10% collectively gained about $1.2 million a year for all 14 million households. I combined the unrealized capital gains with the average income for the top 10%, taking the income figures from RealTime Inequality (produced by Univ. of California Berkeley economists).
Most of that gain went to the top 1% not to the lower 90 to 99 percentiles.
I also used the Fed's Distributional Financial Accounts page for the "corporate equities and mutual fund shares" amounts (87.4% of all stock is owned by 10% of households). Total stocks increased in value by 97% over 6 years, from $29.26 trillion to $59.68 trillion. I added the 87.4% of that value ($30 some tr) onto the the top 10%'s income over 6 years, and divided by 6 for a yearly average of unrealized gains of $554,000 per household among 14 million households.
RealTime shows an average income for the top 10% of $641,000. Plausibly each of the 14 million Hh saw a gain of $1.2 million per year. That's amazing.
The BLS page shows average weekly earnings for the nonsupervisory workers, it grew from $53,456 in 2019 to $56,454 in 2026, almost by $3,000 over 6 years. I may have made some errors, I'm an amateur. But I would guess I'm painting a picture that's close to accurate.
My conclusion before I started the calculation was that the lower-earning 90% were getting a raw deal, the shaft, you name it. I figure pretty soon stuff like this will hit the electorate, and we'll see some demands for change. The RealTime Inequality page shows a shift in income distribution of 15.4% between 1976 and 2023 from the lower-90% to the top 10%. That's in the range of $30,000 per year that once went to every household in the lower 90% now going to the top 10%.
The EPI has data like this too, the RAND corporation also.
My blog is http://benL88.blogspot.com
"
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Digging Into The Recent Wage Decline
It's mostly war-driven inflation, but it's not only that.
Jared Bernstein
Jun 12
READ IN APP
"We’ll see if the most recent round of negotiations to end Trump’s war-of-choice in Iran is truly taking hold. Spokespersons from both sides have zero credibility."
You are too kind. One side at least has negative credibility.
Sort of on topic here, since we're on how workers are doing and their sentiment, I have a comment on the "Vibcession" debate between JB and Paul Krugman, with others chiming in from time to time.
(I realize that debate may or may not have completely fizzled out.)
So, in his arguments, I noted that Prof. Krugman has used an analysis category "low-information voter" (defined in his case as a person who doesn't know which party controls Congress) as a basis for his voter-sentiment analyses.
I happened to bump into that this very same term was used by Rush Limbaugh some years back.
( https://www.forbes.com/sites/cedricmuhammad/2013/08/27/the-tragedy-of-rush-limbaughs-low-information-voter-theory/ )
I'll bet Prof. Krugman doesn't know that, or he wouldn't have chosen that term!
If he finds out, this might be impetus for his switching to an alternative concept of "voter with little or no critical thinking skills", which is a related, but somewhat different concept.
(Whether the category is taken as a whole, or split into "voters with little in the way of critical thinking skills", and "voters with no critical thinking skills at all", or course, should be decided at the whim of the statistician computing the numbers. (😊))
--
Actually, a bit more seriously, if he wants to stay with something that assesses whether a person has a property which we believe is their fault for not having, like having acquired certain basic information, I might use a definition like whether a person knows that, in the 10 Republican states that have chosen not to expand Medicaid, if the state did expand Medicaid, (and therefore gave numerous people below 100% of the Federal Poverty Level an option for affordable health insurance that they now do not have), 90% of the costs of the medical bills would be borne by the federal government, not the state.
(However, I really can't get away from adding a critical-thinking-skills component. We also have to know, if the person does know that, whether they can figure out by some amount of reasoning, at least roughly, what the likelihood is that they themselves, or their family members or friends, will wind up in the future in such straits as to have no option, besides that expanded Medicaid, for any health coverage they can possibly afford at all.)
I think it was G. Elliot Morris who observed that Harris would have won handily if the voter pool consisted only of people who watched or read the news more than once a month. But then there’s the phenomenon of people who know which party controls Congress, know exactly what’s going on in Washington, and feel first hand the rising cost of living — “but you don’t expect me to vote Democrat, do you?” I’m not sure this can be entirely chalked up to a deficit in critical thinking skills or that the vibecession necessarily portends a massive shift away from the GOP.
I love inflation of 2 percent / yr. or less
as opposed to deflation .
Clesrly our Mad King has no connection to the reality his subjects face . Once inflation becomes embedded into pricing expectations , we are in for something that will be difficult to control . Praise be to the Biden Administration for the ability to make a “ soft landing “ out of the supply shock stemming from Covid . We cannot trust the corrupt regime to be able to achieve a soft landing when they wrecked the runway with tariffs , ill begotten war , and out of control fiscal deficits .