MAGA: Dallas Federal Reserve reports 5% wage growth

The Dallas Federal Reserve recently stated the "average individual wage growth" is currently 5 percent, about 2.1 percent higher than the commonly reported growth rate.

Democrat economists and their media fellow travelers, such as NPR and the Washington Post, argue that President Trump's tax cuts and economic expansion have failed to increase the standard of living for American workers.

The Board of the Dallas Fed asked, "Is Wage Growth Higher than We Think?"  Their economists point to the U.S. unemployment rate plunging from 5.8 percent, when President Trump was elected, to the current 3.7 percent — the lowest rate in almost 50 years.  Yet the Bureau of Labor Statistics (BLS) is reporting an "average hourly earnings" growth of 2.9 percent.  Trump critics argue that subtracting the 2-percent average inflation rate, workers' real wages are growing by only 0.9 percent.

The Dallas Fed's economists highlight that the "average hourly earnings" (AHE) growth is not the same as the "average wage" growth experienced by most workers, because AHE "reflects the 'earnings share' weighted average growth in wages and hours, as well as 'composition effects' arising from earnings differences between individuals entering and exiting the workforce."

The Bureau of Labor Statistics develops its earnings growth by surveying 440,000 businesses for salary and hourly employee payroll expenses over a four-month period.  The BLS waits eight months and then surveys the same businesses for three months in a row.  The 15-month period is then "smoothed."  The BLS then divides the compensation paid over the number of hours to determine what it trumpets as the earnings trend.

According to the Center for Budget and Policy Priorities, incomes after inflation for the top 5 percent of Americans during President Obama's eight years was up about 16 percent.  That compares to 4 percent growth for the median U.S. income and a negative 4 percent decline for the bottom 20 percent during the same eight-year period.

The Dallas Fed found that AHE heavily over-weighted the earnings of what Rep. Alexandria Ocasio-Cortez (D-N.Y.) calls "tippy-top" earning CEOs.  Eliminating the high-earner over-weighting at the same 440,000 businesses, the BLS reported that earnings growth during Obama's presidency would have been about zero.   

BLS's reported earnings growth contrasts with the straightforward Census Bureau calculation of wage growth from the Current Population Survey (CPS) that simply surveys wage changes for 60,000 average wage-earning individuals each month.

The Dallas Fed, after comparing the two methodologies, stated:

CPS average individual wage growth is always higher than AHE growth. Most recently, CPS average individual wage growth was 5.0 percent — a full 2.1 percentage points greater than the BLS' AHE.