Some people think that even though the economy has been slowly but surely growing, most of the new jobs that have been created have been “bad” ones — low-wage gigs in the retail and service sectors.
But High Frequency Economics’ Jim O’Sullivan says that’s not the case.
In a new note, he compares the rate of earnings growth to the increase in wages as measured by the employment cost index, which is evenly weighted across all sectors, and finds they’ve been on the same track. If only bad jobs were being created, the former measure would be falling further.
Here’s the chart:
HFEAnd here’s his full take:
One part of the May employment report that was weaker than expected was the flat reading for average hourly earnings. Despite that weakness, the change from a year ago was stable at 2.0%, which is around where the trend has been since 2010. Year-over-year gains averaged 2.0% in 2011, 1.9% in 2012 and 2.0% in Q1 of this year. While not strong, the pace has not been any weaker than the pace for wages in the fixed-weighted employment cost index—the ECI.
That pattern disproves the widespread impression that mainly “bad” below-average-wage jobs are being created. Average hourly earnings would be declining relative to wages in the ECI if job growth were disproportionately weighted toward below-average-wage jobs. That has not happened. If anything, the data show the opposite pattern.
Business Insider Emails & Alerts
Site highlights each day to your inbox.