I've either discovered something interesting or else I've made a big mistake. I'm not sure which.
It started with a tweet from the St. Louis Fed that linked to a paper about wage growth. The authors compared wages (from the QCEW survey) to inflation in individual cities between 2019 and Q2 of 2024, but they displayed their results as a complicated scatterplot, which seemed kind of silly to me. Why not just calculate real wage growth in each city and display it?
So I extracted the same information they used for the 20 biggest metro areas and did just that. The only difference is that I started in 2020 because that's all the QCEW tool would give me:
This result is so startling I spent hours trying to figure out where I went wrong. But the QCEW wage data and the inflation data are both straightforward. What I discovered, if the QCEW numbers are reliable, is that since 2020 real wages are down in virtually every big city. I also did a spot check of smallish towns and found the opposite: real wages were consistently up.
Now, the QCEW wage data is more conservative than other sources. Here is nationwide nominal wage growth (i.e., without adjusting for inflation) from every source I could think of:
QCEW is a huge outlier. Partly these differences are because each estimate measures something a little different, but QCEW isn't measuring anything that different from, say, CES or CPS.
But even if you figure QCEW is off and just arbitrarily increase wage growth across the board to bring its national average up to the CPS national average, more than half the big cities in America still show real wage declines—some of them huge:
New York City wages are down 15% even after the arbitrary boost. That's a gigantic decline.
In other words, starting from just before the pandemic, big cities—which are strongly Democratic—mostly show real wage declines while small towns—which are more Republican—show significant real wage increases. This is true even in the best possible case. Does this explain anything about the election? Or is it just some weird statistical artifact? I lean toward this being real, but I'm still not 100% sure.
POSTSCRIPT FOR THE CURIOUS: It turns out that inflation varies widely in big cities across the country. Over the 2020-24 time period, it ranged from a high of 29% in Tampa to a low of 17% in San Francisco.
I think Kevin is making a major mistake somewhere. The scatterplot in the paper, "Nominal Wage Growth and Accumulated Inflation from 2019:Q1 to 2024:Q1" shows most cities above the 1:1 line. That is in all cities except Atlanta, Philadelphia and Riverside wage growth exceeded inflation. This is the opposite of what Kevin gets and is more in accord with other wage surveys, some of which Kevin regularly refers to.
I am not going to try to reproduce what Kevin has done - he often doesn't give enough information. Maybe he put in an extra inflation correction.
I don't see anything silly about the scatterplot.
Good point--double correcting for inflation would do this...
My money is on mistake, too. The biggest wage gains were in the hospitality industry, which is much more concentrated in large cities.
Good catch. Apparently something went wrong in the data transform. The height of the bars in KD’s plot should be in a fixed ratio to the vertical distance of the scatter plot points to the 1:1 line.
I’m still going to take the occasion to complain about the sloppy measures used in economics. ‘Wage’ should refer to an hourly rate of pay for wage earners, famously a sticky value. I skimmed through some of the Methods pages at BLS, and it appears that ‘average weekly wage’ actually means ‘average weekly earnings’, apparently derived by dividing aggregate wages paid by the count of employees — a number which for wage-earners is more volatile than the wage rate, being driven by hours-worked and composition (that is, the mix of job classifications and levels). For salaried employees, weekly earnings are just prorated from (sticky) annual pay, but composition is still a factor. The implication of these considerations is that the data gives us very little information about, say, the proportion of workers who actually experienced a loss in purchasing power.
It's the difference in starting at the year 2019 and the year 2020 with it's 15% wage growth due to covid layoffs.
The rural/urban divide may be accounted for by minimum wage increases that have been taken place over that time. Cities tend to have higher local minimum wages already, so increases at the state level can have more of an effect on mid-size cities and rural areas. Some of the states that have passed increases recently tend to be more rural too.
If the drop in city income is real, could that be from working from home?
Barring any mistake Kevin made, I think you've hit on the two most likely explanations. Working from home was the first thing that came to mind, but the min. wage situation makes sense also.
Re: If the drop in city income is real, could that be from working from home?
My question too. Is the wage data tabulated by where the company is, or where the employee is? Firms that went to 100% WfH have generally switched the work address of individual employees to their home address, which matters for both taxes and benefits (i.e., if your job is in Maryland, but you live in Delaware and that's now your work address, you will pay DE income tax and if you lose your job you will collect DE unemployment benefits). I can see how the transfer of higher paid jobs out of cities by this fact would lead to city wages appearing to decline even if the jobs still in cities are paying somewhat higher wages.
Housing housing housing. Housing costs in big cities have skyrocketed. I’m sitting in a house that in any rational market would be worth maybe 270k, and yet the same floor plan down the street just sold for 50k over the 500k asking. Yes this is an affluent neighborhood north of Atlanta but I assure you these houses aren’t worth a half million.
A thing is worth what someone will pay for it. If people are paying $550 k for houses like yours, then your house is worth $550 k.
There’s a difference between price and worth, one that Republicans never seem to appreciate, until they themselves are struck by a natural disaster or something and then they’re the first to bitch about the Dasani water that was $2.99 for the last year becoming $9.99 for a few days. I wish Kevin would get better trolls, ones that at least tried to understand things before bleating out mindless statements.
"..ones that at least tried to understand things before bleating out mindless statements."
Maybe it would be more accurate to say the house is worth $250k and the land is worth $300k, Or something like that.
There’s a difference between price and worth
No there isn't. If yourTesla shares are worth $900K it's because people are willing to pay $900K for them.
If three months from now Tesla's share price has halved, your shares are now worth only $450K.
It's all because of what people are willing to pay for them, which sets the price.
Value is what it’s worth to me. Price is what it’s worth to the market. The former tends to fluctuate less than the latter.
Sorry, but you have complete shit for brains. Economists claim what you say because economists are the stupidest people on the planet.
Um, this is a closed club, and you have failed your entrance exam. Bye-bye.
Supply, demand, market clearing price etc. etc.
The basic problem we created after WWII was building suburban style housing - low density with large lots, individual single floor houses. Everyone drives to work. Works fine if there is only a certain population growth in the area.
Then population keeps growing and the city/suburb grows expotentially with that kind of housing and it stops working, particularly with zoning for single family houses and other restrictions to maintain that kind of plan. US population has over doubled since 1950, with rural areas depopulating. Tens of thousands of small towns are now half empty high crime crackhead/junkie towns.
To fix it means loosening the zoning rules, tearing down those ranches and putting in denser housing. What often happens is the tearing down part and building a McMansion there instead. So what was a working class suburban house bought by on a factory worker's pay with a stay at home wife is sold for a million bucks and a million more is spent building the McMansion. And the big factor there is the creation of more and more income inequality fostering that.
FWIW
West Coast cities have seen healthy raises in the minimum wage over the years, and contrary to some reports, employment has been just fine. NYC raised its minimum just one buck since 2016.
Barring any mistake, I would be very curious about the average verse median incomes in this time period.
I'm more interested in the inflation rate over the last 4 years.
If someone put $100 in a savings account in 2020, by now it's lost 20% of its value. That's a huge problem for an incumbent administration. The lessons of the past, Gerald Ford (Whip Inflation Now) and Jimmy Carter, are clear. Failure to clamp down hard on inflation - even if it risks triggering a recession - is politically fatal. Biden was around during those years (senator in 1973), yet was sanguine while he was president. What was he thinking?
I expect Biden was thinking that the post-covid inflation was a world wide phenomenon that would fade away by itself (it has) and which he couldn't do anything about anyway, so remaining calm and carrying on was the only viable choice.
Said it before and will say it again: Biden was not going see interest rates rise to the point where it triggered a recession and job loss, especially in the wake of a pandemic that saw 15 percent unemployment and caused his predecessor to lose his job! Jimmy Carter sadly tore the Democratic Party apart because by inducing a recession in 1979 with 20; percent interest rates to being down 18 percent inflation. Biden was around for that too and wanted to avoid the same thing happening again. Bottom line is the economy was solid enough to run on but unfortunately was mishandled by the Harris Walz campaign to do so.
No matter what I've said about Jimmy Carter in these posts - Requiem im Pacem to a good and decent man
What specific policies should Biden have enacted in order to whip inflation? What policies would require congress to pass legislation, and what would have been the probabilities of getting that done, especially after the midterms?
Nixon's wage and price controls didn't work, so what else would you recommend, especially since inflation was worldwide, and not specifically caused by the US deficit spending?
Trump would have screamed about it daily, blamed the Democrats (notwithstanding who controlled Congress), and would have convinced his loyal followers that he was not to blame. His superpower is lying without shame.
"What specific policies should Biden have enacted in order to whip inflation? ..."
He should have omitted the last part of the COVID stimulus which was throwing gasoline on a fire.
Barely any effect. Kevin has gone over this repeatedly.
"Barely any effect. Kevin has gone over this repeatedly."
Enough effect to lose a close election.
The ‘last part of the COVID stimulus’ that mysteriously caused higher inflation in Europe than in the U.S.?
Milton Friedman would point out to an ignoramus like you that fiscal policy doesn't cause inflation. Only fed actions have an impact on inflation in the american system (The fed is forbidden by law from printing money to support fiscal policy.)
WIN buttons for everyone, obviously.
It’s so weird that the entire world experienced inflation from 2020-24, all due entirely to Democrats fucking things up. I know it’s all Biden’s fault, but it’s amazing that no other country managed to “clamp down on the inflation” either. As Dana so wisely says, “What were all of them thinking?!” Did no foreign government have any agency at all against Biden’s efforts to fuck everything up?
Fucking dumbass. I really hope all the Dana Deckers on here are the first to have their pockets picked by Trump and his minions.
"... Did no foreign government have any agency at all ..."
The status of the dollar means that other countries suffer when the US has bad policy.
Convince me.
Not necessarily. If the US has inflation due to ‘too much money chasing too few goods’, the upward pressure on prices would benefit foreign producers who export to the U.S. Domestic producers, according to classical theory, would be pressured to increase wages; foreign producers wouldn’t be — the higher export prices would mean higher margins for them.
Your move.
"...the higher export prices would mean higher margins for them. ..."
It also means domestic production would be diverted abroad raising domestic prices.
Again, not necessarily — the price rises in the US market would mean higher margins for imported goods even at the same unit sales volume.
Producers sell where they can get the best prices. If prices rise in the US production will be diverted to the US. In a world market increased demand in the US will push up prices everywhere.
Not the best prices, the best margins; but exports incur different costs from domestic sales, so, depends.
Just making it up as he goes......
I'm more interested in the inflation rate over the last 4 years. If someone put $100 in a savings account in 2020, by now it's lost 20% of its value. That's a huge problem for an incumbent administration.
Inflation from Jan 2021 to Nov 2024: 19.3%. First time the Dem party lost a reelection bid since Jimmy Carter.
Makes sense, right? But consider this.
Inflation from Jan 1981 to Nov 1984: 24.6%. Reagan carried 49 states and won the pop vote with an 18% margin, a landslide that no one has come close to matching since.
If a Republican were running for reelection in 2024 with Biden's economic record, the GOPer would have won 350 EV and a decisive majority in the pop vote.
It doesn't matter the issue -- economic record, corruption, infidelity, basic incompetence, truth-telling -- the rules are never the same for Republicans and Democrats.
Inflation from Jan 2021 to Nov 2024: 19.3%. First time the Dem party lost a reelection bid since Jimmy Carter. Makes sense, right? But consider this. Inflation from Jan 1981 to Nov 1984: 24.6%. Reagan carried 49 states...
Right, but prices rose 42% during the Carter years. So voters accurately perceived a major improvement during Regan's first term. That's very different from voter perceptions of inflation when it comes to Biden's term vis-a-vis Trump's first term. And needless to say mortgage rates were mostly declining during Regan's first term, in contrast to the Biden years.
And real wages during Carter's term in office declined by about 7%, compared to a modest rise (between .5 and 1%) during Reagan's first term.
the rules are never the same for Republicans and Democrats.
I think it's overwhelmingly likely Vance will lose in 2028 if his boss presides over a big spike in inflation compared to the Biden years. Also, very nearly 90% of the electorate (divided evenly down the middle) simply won't even contemplate voting for the other party. That's a big change from 1980. So you don't need very much in the way of economic problems during your administration to lose the election (your opponent, after all, is going to be within spitting distance of an Electoral College majority simply by virtue of being a major party nominee). I believe this fact, more than any other, explains why Kamala Harris didn't prevail. We've now had three election in a row where the incumbency White House party has lost. That hasn't happened since the 19th century. The nice part is Democrats will now have this dynamic working for them in 2028.
(Indeed, the importance of thermostatic effects might well play out spectacularly in 2026: I'd frankly be pretty shocked if Democrats don't take back the House in the midterms. If I'm right, that will make 4 out of 5 elections where Democrats have beaten the GOP. It just sucks that the fifth one allowed Trump back in.)
Yes, you're right. The high-inflation decade before Reagan was the opposite of the low-inflation decade before Biden. That affected perceptions of improvement, to Reagan's benefit. I've made the same point before.
Still, inflation during the Biden years was still a good deal lower than during Reagan 1.0, which is a point to consider in response to Dana's comment that ~20% inflation was in itself a "huge problem" for an incumbent. The prior time an incumbent ran with even higher inflation, it was not a problem at all. Context matters.
While I'm here, a couple of other points to compare Reagan and Biden. Reagan was reelected in a landslide in a month with 4.1% inflation. Dems lost an election with inflation a big factor though it was much lower, 2.7% in November, a historically good rate and the 18th month in a row with a sub-4.0% rate. (As you note, 2.7% is still not as low as the sub-2.0% decade of the 2010s.) In other econ data, Biden had a better record than Reagan in job creation and in lowering unemployment, which he got roughly zero credit for.
I give Biden and Dems straight F's for messaging. They failed to tell the story about their significant achievements. They let misinformation stand un-rebutted. They faced a hostile media environment and too often sat on their hands or played defense when they should have played offense.
That doesn't happen with Republicans. The media give the GOP every benefit of the doubt and in general their coverage of politics is a case of criminal malpractice.
That's why I do think a Republican running in 2024 with Biden's record would have won reelection handily (though not with 350 EV, a number I pulled out of the air earlier).
Things that would have been publicly perceived as successes under a Republican: the Afghanistan pull-out (airlifting 100,000+ after all seemed lost); job creation; bringing down inflation (from over 9% to 2.7%); avoiding all-out war in the Middle East; and any legislative achievement like the Chips Act or IRA, not that an R would have tried. That Biden earned no credit for any of it is an abysmal failure.
The GOP 350 EV scenario is probably out of reach in today's hyper-partisan electorate that you mention. If the electorate shifted 5% more red, that would only give the GOP another 15 EV (to go with Trump's 312). On the other hand, if the electorate shifted 3.2% more blue, that would give Dems another 82 EV (Harris had 226). So a fairly small shift in the Dems' direction could give the White House back to the good guys.
Future elections are hard to predict. Assuming higher inflation, that would tilt the odds in the Dems' direction. I can also see a scenario with inflation in a range that does not hurt Trump politically and the economy doing relatively well. That's the trouble with Trump. The possibility of catastrophe is always there, but he has a bigger margin to screw up before he'll have to pay.
I don't know who'll be running in 2028. Vance and the rest of them all lack Trump's "appeal." It will be hard to find anyone that inspires the MAGA crowd as Trump does.
I do not think the Trump 3.0 scenario is actually possible. If I'm wrong about that, we don't live under the Constitution of the United States of America anymore.
"Still, inflation during the Biden years was still a good deal lower than during Reagan 1.0," Almost all of Reagan's inflation was in his first two years if office while Biden had no inflation in his first year if office. In the spring of 1980 Reagan was way behind in the polls. But by the fall, inflation was close to non-existent, unemployment was at levels not seen for a decade and growth was through the roof. Biden had great economic numbers for his term, but that was because of events prior to the election year. Unemployment was going in the wrong direction, gdp growth was going in the wrong direction, inflation was going in the right direction but too little too late. Plus, there is the hack gap, republicans most fundamental organizing principle is that there are no circumstances where a conservative should ever tell the truth while democrats place a great deal of value on the truth.
Almost all of Reagan's inflation was in his first two years if office while Biden had no inflation in his first year if office..
Inflation in Reagan's last year of his first term (1984) was 4.3%, historically high though down from its peak. (Inflation in the last year of his second term, 1988, was still above 4%.)
Inflation in Biden's first year (2021) was 4.7%. I don't know how you call that "no inflation." Inflation peaked in June 2022 at 9.1%, then dropped -- and dropped quickly -- after that.
In the spring of 1980...
You lost me after that.
There's a long trail of data on the economy and on economic sentiment. We can track the relationship between the econ data and the sentiment, and the relationship broke with historical norms during Biden's term. Sentiment was worse than during the Great Recession despite econ data showing a booming economy. Hell, polls before the election showed a majority (59%) thought we were in a recession. Inflation hurt Biden's performance rating but it was misinformation and media malpractice that killed it.
C'mon man, the f isn't even near the n.
Other wise, "thumbs up" because there isn't a thumbs up function here.
+1
This kind of simplistic look at only cash savings in a non-interest bearing account is beyond silly. Literally no-one is in this situation.
Wages, interest bearing accounts, COLA adjustments, housing values, equity/stock accounts, debt repayment....all of these are significantly more important than cash stuffed under your mattress.
That crazy internal MAGA war on immigrant labor is raging, reaching new heights of hypocrisy. The best part of it includes Trump following Musk's lead on the issue, like the dog that he is, responding to his master.
BTW, weren't you warned about aggregated data providing misleading narratives? 🤔
With any data analytics, starts with quality and accuracy of data, as well as question being asked (and hopefully answered).
In this case, presumably this is surveying, however administered, and either asking people how much they specifically make or what income bucket they would put themselves in (and bucketing strategy and common sense come into play here).
If all goes right, may get some useful insights.
Intuitively, one would expect rural areas to go up in this time period due to high-wage workers taking advantage of remote work to move to areas with lower cost-of-living.
For urban areas to drop dramatically would be less expected after factoring out all the high-wage folks who moved away, leaving more service workers and people who have to be physically present at work (so maybe could help explain it?).
Or are these surveys following the same cohort of folks who have not moved?
Interesting, but they aren't moving away fast enough. C'mon people, call Bekins today!
Not a stats guy but I’d say no way NYC is short on wages. Maybe it’s because big Wall St houses screw things up with high dollar players. Jerk off employers such as UBS and Cantor Fitz ( and it subs) Fire successful people that make a lot of money and replace them with cheaper younger workers. Also could be where more humane Wall Street houses like JPM give retirement incentives to successful folks and replace with cheaper alternatives. Just an idea.
The answer is housing costs. Why did housing costs not come up at all, even after you looked at the by-city measure of inflation that you used? Didn't even try to explain that one, huh? It would certainly be counter to the "only CA has a housing crisis" narrative.
Housing cost increases in cities are higher than housing cost increases in less populated areas. This means that in small areas your wages and costs can all go up by 5% but if national CPI (which it appears is what you used?) went up by 8% then you have a "real wage increase" even though percentage-wise you're in exactly the same place.
Similarly, in large cities if your wages and costs both went up by 10% so that you were in exactly the same position (percentage-wise) as before, but the national CPI was 8%, then you had a "real wage decrease" even though you're in exactly the same place.
However, everybody knows that wage increases lag behind price increases.
This is not a real effect. Wages only go up… no one takes a cut in pay. But they move from one place to another.
Inflation by race. Interesting, and maybe in sync with real wage data in cities.
https://bsky.app/profile/crampell.bsky.social/post/3lef6okmbcs2s
Link to Minn. Fed will get you some other comparisons.
You can;t learn anything about wages if your baseline is 2020. WAges were about 15% higher that year as a result of covid shutdowns primarily affecting the lowest income people and not affecting the highest income people at all.
Kevin, we love you but maybe this one needs a do-over.
As a (returned) resident of the greater Tampa area, that 29% inflation rate is largely about the huge runup in the cost of gousing.
Housing was probably way up too.