Average Wages Dropped in October Due to Inflation

Average Wages Dropped in October Due to Inflation Average Wages Dropped in October Due to Inflation A low supply of tissue paper seen on shelves at a Dollar Tree store in the Queens borough of New York City, NY, October 19, 2021. (Anthony Behar/Sipa via AP)

By Theodore Bunker | Thursday, 11 November 2021 11:33 AM

Although the Labor Department reported on Friday that average hourly earnings had increased in October by 0.4%, the increase of top-line inflation by 0.9% during that month means that real average hourly wages actually decreased during that time, CNBC reports.

According to an economic news release from the U.S. Bureau of Labor Statistics on Wednesday, "real average hourly earnings for all employees decreased 0.5% from September to October, seasonally adjusted … This result stems from an increase of 0.4% in average hourly earnings combined with an increase of 0.9% in the Consumer Price Index for All Urban Consumers (CPI-U)."

Joseph LaVorgna, chief economist for the Americas at Natixis and the ex-chief economist for the National Economic Council under former President Donald Trump, told CNBC that "for now, inflation is going to continue to run above very solid wage growth. This is why when you look at consumer confidence, it’s really taking a beating. Households do not like the inflation story, and rightly so."

The Bureau of Labor Statistics adds that "real average weekly earnings decreased 0.9% over the month due to the change in real average hourly earnings combined with a decrease of 0.3% in the average workweek," and notes that "real average hourly earnings decreased 1.2%, seasonally adjusted, from October 2020 to October 2021. The change in real average hourly earnings combined with a decrease of 0.3 percent in the average workweek resulted in a 1.6% decrease in real average weekly earnings over this period."

According to the New York Federal Reserve, which released the latest poll on inflation expectations on Monday, customers predict inflation will continue at 5.7% over the course of the next year, which LaVorgna said "means there is a potential structural break in inflation expectations. Unless there is a collapse in growth where you have a recession, we could be entering a new inflation regime."

He went on to say that he’s "optimistic you’ll see some moderation in inflation, which means you’ll see real wages back in positive territory by the back half of next year. But inflation will remain uncomfortably high" for several months.

Original Article