It’s now safe to say that the U.S. economy is in a boom. Small business leaders are saying it. Measures of business optimism, tracked by the National Federation of Independent Business (NFIB), are at all-time highs. Business investment as a percent of gross domestic product is almost as high as it’s been since the recession, and job creation continues at a healthy clip.
But one important economic indicator remains disturbingly subdued: wages.
In dollar terms, wage growth has been superficially healthy - in January, average hourly earnings rose 2.9% from a year earlier. But consumer prices increased 2.1% during the same period. In other words, real hourly earnings grew by only 0.8% - less than half the real growth rate of the overall economy.
Meanwhile, the NFIB survey reports that 31% of employers are paying their workers more. But this is also presumably unadjusted for inflation. Because inflation is positive in most years, wages tend to go up on average every year. But that doesn’t mean workers are actually getting more purchasing power.
In terms of real wage growth, 2017 wasn't a great year, and for nonsupervisory workers, it was especially slow.