What I take to be the main series in the Atlanta Fed’s Median Wage Growth Tracker ticked up from an inflation rate of 4.3% in January to 4.4% in February. The series is published as a 3-month moving average of the surveyed 12-month change. So, it is obviously pretty heavily lagged and smoothed. But the Atlanta Fed at least publishes an unsmoothed 12-month rate for a concept that is very similar to what I take to be the main series. And there, the spot 12-month change and the 3-month moving average of that was the same 4.3%. So, at least we can say the 3-month averaging was not an issue this month.
I like to compare the Wage Tracker with the 12-month change of the core ECI, as in the chart above. The ECI is a monthly series but it is measured only quarterly. So to make the comparison, I have to convert the Wage Tracker also to a quarterly frequency. I do this by taking the last observation for each quarter for all but the most recent quarter. For the most recent quarter, Q1, I use the most current observation, which is February. So, the “Q1” wage inflation rate is 4.4%, which is a slight uptick from the Q4, i.e., December, value of 4.2%.
The Wage Tracker is consistent with a continued gradual deceleration in the core ECI wage inflation rate, which is the co-called Gold Standard of the wage inflation figures. We would probably be best off looking at it only, but it is produced with a long reporting lag, and only quarterly, as mentioned.
I have noticed in my regular monthly updating that the wage growth signals have tended recently to be somewhat random. We get a warm average hourly earnings series here, but then no confirmation from the Wage Tracker, or vice versa. And the ECI has continued to moderate and has recently slowed to a pace that is consistent with the labor market being near full employment. For me, that would be the main inference. The labor market is very close to full employment, although gun to head I would suggest it is more likely running slightly above full employment than below. The Employment Gap that I calculate every month suggests as much, and the ECI growth rate — including what is roughly implied for Q1 — remains slightly elevated relative to its own history. But the stronger point is probably that we are in the neighborhood of full employment, with inflation running just slightly above target. This economy did not need fixing, at least on the macro side, but alas the practical men of business have rescued us from the pinheaded professors, glory be.
Source: Federal Reserve Banks of St. Louis (FRED) and Atlanta.
Wage growth tracker is actual to February, although expressed at a quarterly frequency. The ECI is also expressed at a quarterly frequency and is actual to December, depicted as Q4.
