According to Neil Irwin, “the job market is fine.”
I suppose that’s the way it looks in the short view. The official unemployment rate in the United States remains below 5 percent and real hourly wages have continued to increase as the labor market has tightened. Clearly, as unemployment has declined after the worst crisis of capitalism since the first Great Depression, employers have been forced to pay more in order to get access to employees’ ability to work.
However, throughout the entire period of the so-called recovery (from June 2009 through May 2016), real wages for non-managerial labor have risen only 3.8 percent (from $20.48 an hour to $21.25)—and only 4.8 percent above their recessionary low (of $20.27 in October 2012)—and, in both cases, that’s mostly because inflation has been so slow.
If we take a longer view, things look even worse. Real hourly wages (in 2015 dollars) remain less than what they were in April 1978 ($21.48) and even further below their post-1964 peak ($22.37 in January 1973).
So, even though workers’ wages have been climbing, unevenly, from their absolute low (of $18.07 in August 1994), they still remain below what they were more than five decades ago.
In the long run, then, the U.S. labor market has been anything but fine.
The data on wages (hourly wages for production and nonsupervisory employees) and inflation (the Consumer Price Index for urban workers) are from the Federal Reserve Economic Database. I transformed the 1982-84 price index into 2015 dollars and then calculated real hourly wages for the entire period.
The movements in the chart mirror those in a chart using the existing 1982-84 price index, which is still the only one available in the FRED database.