ON EARNINGS & WAGES, THE PRESIDENT IS ONCE AGAIN BLOWING SMOKE

The UN quickly recognized that Trump was lying

The president's economic team tells us wages and salaries are rising, but that is very misleading.

It is true that the robust economic numbers that started under Obama, they did continue during this Trump presidency, but the American public has been unmoved by such good news as to the lowest US unemployment level in nearly half a century.  Its enthusiasm has been dampened by the underappreciated economic reality that the typical working American's earnings, when properly measured, have declined during the Trump administration.

The president's economic team tells us that positive earnings data from the Bureau of Labor Statistics (BLS) suggests that wages and salaries have been rising.  But those figures are very misleading.

They refer not to how much an average working person earns, but on the "average earnings" of all employed people.  In times of rising inequality, employees at the “top” are only earning "average" earnings.  Shift to the bureau's earnings data for an “average” or "median" working person, and most of those gains disappear. Another catch: “The data used by the White House doesn't account for inflation.” Adjust the median earnings data for inflation, and we see that average earnings are less than just 5 years ago.

As an example, these technical slights-of-hand distorts what is happening to people's earnings. Using the White House's data, average earnings rose from $894.06 in January 2017 to $937.02 in August 2018. That suggests impressive gains of $42.96 weekly over the 20-month period and $30.02 weekly over the past year.  But what about “median earnings” rather than “average earnings”: that is, earnings of those in the middle of the distribution?  The BLS has a different database for that view, and its numbers show a very different picture.  Median weekly earnings of all workers rose from $865 in the first quarter of 2017 to $876 in the quarter ending June 30, 2018.  The typical working American's earnings increased $11 weekly over 18 months, barely more than one-quarter of the economic progress touted by the White House.

But even that modest gain is not very meaningful. The significance of what people earn lies in what they can do with their earnings, and inflation eats away at what any of us can purchase or save.  As a result, serious earnings is always framed in inflation-adjusted, or "real" terms. From January 2017 to June 2018, inflation totaled 3.77%, while the $11 increase in unadjusted weekly earnings over those 18 months represented gains of 1.27%.  That 2.5% loss after taking inflation into the consideration.

Catherine Rampell of The Post says that as apposed to what the president says, “The president does not control the economy.” And I agree with her.

And there was another blow to the White House's preferred economic narrative: “The current earnings decline is a new development. Using the same measure, real median weekly earnings increased substantially during Barack Obama's final 18 months as president.”

Before adjusting for inflation, median weekly earnings increased during Obama's last 18 months from $803 in the third quarter of 2015 to $849 in the last quarter of 2016. People's average weekly earnings thus increased $46, or 5.73%, before adjusting for inflation.

Over the same months, cumulative inflation from July 2015 to December 2016 was 1.12%, so the real earnings of a typical working person clearly increased. By how much? Adjust the median weekly earnings in December 2016 of $849 for the 1.08% inflation over the preceding 18 months, which comes to $838.82. In real terms, the weekly earnings of a typical employed American increased $35.82, or 4.5%, over Obama's last 18 months in office, growing from $803 in the third quarter of 2015 to $838.82 in the fourth quarter of 2016.

In Ronald Reagan's succinct terms, average working Americans are worse off under the Trump presidency than they were under Obama's. Yes, low unemployment is something to applaud, but there might be a good reason that so many who have jobs aren't applauding the president.

As usual, President Trump is once again blow smoke.

Copyright G. Ater  2018