When a Raise Isn’t Much of a Raise

Relatively low inflation is causing inflation-adjusted wage gains to seem a bit more grand than they really are.

Real average hourly earnings for all employees increased 0.5 percent from February to March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported last week.

This result stems from a 0.2-percent increase in average hourly earnings combined with a 0.3-percent decrease in the Consumer Price Index for All Urban Consumers (CPI-U).

Consider that CPI tracks the price of a “basket of goods” and arrives at an average. Food costs may go up, health care costs go up – but if there’s a drop in energy costs (as there has been) it can actually result in the overall inflation rate going negative.

Next thing you know, some cheery person on the TV news is crowing about how things are improving for American workers. “Inflation is low! Wages are rising faster than expected!” Well, yes, but.

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