Labor and earnings update

Weekly data from the BLS is in. Wages went up 0.1%, but the increase was offset by increases in gasoline and housing, which rose 0.2%, leaving a  decrease in real earnings of 0.1%.

Wages have been stagnant, with overall real earnings not keeipace with incremental increases in food, housing and energy costs. These declines have the largest impact on those earning the least, as they often don't have discretionary expenses that can be limited to address the increased cost of necessities.

The employment numbers continue to contract, showing a labor market at it's tightest in 48 years.
The 4-week moving average was 216,000, a decrease of 5,500 from the previous week's unrevised average of 221,500. This is the lowest level for this average since December 20, 1969 when it was 214,500.

In 1968, the minimum wage was $1.60/hour, achieving a zenith in buying power. By comparison, the minimum wage would need to be $10.80 today.

Why the fuss?

While we (David, the boys and I) were at my parents' house on Sunday evening, the price of gasoline came up, along with a bunch of other real-life price issues. I mentioned that I remember when there was an outrage when gas hit fifty cents a gallon. My mother laughed, saying that I had not been alive when gas was that low. [Actually, when I was born, gas was thirty-five cents a gallon¹, with many stations selling at far less in the gas wars. Minimum wage went up to $1.30 that year ² and a loaf of bread was twenty-five cents ³] While it might seem like ancient history, it is not, though I think the prices we are seeing today are with us to stay.

According to the AAA Fuel Gauge, the national average price for a gallon of regular gas today is $4.026. This is lower, but not really different from last month's average of $4.069. The gas prices in my area aren't far behind, having an average of $3.948 a gallon. Just a year ago, according to the AAA Fuel Gauge, that same gallon of gas was just above $2.68. Virginia was actually higher than the national average last year, with $2.824 a gallon. Back then we were all complaining loudly, decrying the effects and some even scoffing at the possibilities of three-dollars-a-gallon at the pump. Unemployment was 4.6 percent and minimum wage was $5.85.

Today, in accordance with the Fair Minimum Wage Act passed a year ago, the minimum wage is going up to $6.55. Even at last year's levels, that still leaves a full-time minimum wage earner below the poverty line. Given the real cost of energy and food these days, the increase has to be a beacon of hope in turbulent economic waters. I'm not expecting to see a reversal, but the reality is that this increase is likely going to help keep people from facing homelessness. The unemployment rate is up (5.2 percent for May 2008), the stock market is down, and the headlines on the front page of the financial section read like lyrics to a country song.