This is not how an economic recovery is supposed to work: The average American still earns less now per hour after inflation than he did five years ago when the U.S. exited its worst recession in decades.
The lack of wage growth goes a long way in explaining why the recovery is the weakest since the Great Depression. Consumer spending drives about three-quarters of U.S. economic activity and it's been unusually weak. Absent rising incomes, consumers can't spend much more than they already do without depleting their savings or going deeper into debt, neither of which seems likely.
In May, the real average hourly wage fell 0.2%, the government said Tuesday. Real wages have fallen thee straight months amid a sudden surge in consumer inflation over the same time frame.
As a result, the average hourly wage for a typical American worker registered just $10.28 in May, adjusted for inflation and measured in constant dollars. The real hourly wage totaled $10.31 in June 2009, the last month of the 2007-2009 recession.
A partial saving grace is that the economy has improved enough to keep people working longer each week. So the average weekly paycheck has risen an inflation-adjusted 1.8% from June 2009 to May 2014.
What might be surprising is that the slow growth in inflation-adjusted wages is nothing new. Real wages also grew less than 2% overall from the start of the recovery after the 2001 recession to the end of 2007. Americans supported an unsustainable rate of spending last decade by using the proceeds from a soaring stock market, obtaining home-equity loans amid a bubble in real-estate values or by relying on cheap and easy credit.
Most economists believe faster job creation and falling unemployment should soon put upward pressure on wages, forcing companies to pay more in a scramble to attract workers as the labor market tightens. Yet so far there's little evidence to suggest that the workers' share of the economic pie is growing.
-- Jeffry Bartash
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