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Wages rose sharply in Q4

Wages went up at a very healthy rate in the final quarter of 2024: 2.8% for men and 2.1% for women.

As usual, this is good news and bad news. It's good news for workers but bad news for the Fed, which will take this as a sign of inflation and keep interest rates high.

33 thoughts on “Wages rose sharply in Q4

  1. Justin

    The fed should leave interest rates where they are. They are not high… they are normal. I’m sure there’s a chart somewhere to demonstrate.

    1. CAbornandbred

      Everything is relative. If you were an adult in the 1970's todays interest rates look pretty nice. If you became an adult after 2000 todays interest rates are way too high.

      1. Justin

        Right. Interest rates were lower in response to the attacks on 9/11, the financial crisis of 2008, and the pandemic of 2020. To get rates low again, we’re probably going to need a similar crisis!

        Plus… I don’t want rates to go lower as it helps trump. Screw that guy and all his cult followers

    2. Creigh Gordon

      Paying interest on Federal Government liabilities is a legacy of needing to protect the Treasury's gold supply when the money was convertible to gold. It has no relevance to fiat money.

      If the Government promises convertibility to gold, the prime directive is don't run out of gold. There are two ways to do this: limit the amount of currency you issue, or pay people to forego convertibility by swapping their currency for (non-convertible) bonds. The interest paid is compensation and motivation for the bond buyers assuming the risk that the Treasury will default on gold conversion. Neither of these constraints have any applicability to our nonconvertible money. Paying interest on Government securities is just giving money to people because they already have money. And it's probably inflationary, as it puts more printed money in peoples hands, and raises costs for businesses that will usually be passed on to consumers.

    3. jdubs

      The Fed should definitely no be setting rates based on what people think is a 'normal rate'. There is no economic reason to make up 'normal rates' and then assume that they should be applied whenever we randomly decide that the situation is also 'normal'.

      That's not how any of this works.

  2. KJK

    Don't worry, Mango Mussolini will have to fire Powel if he doesn't lower interest rates. Do we think that because he would need to show cause to do so, or that it has never happened before, or that the 1913 Federal Reserve Act was designed so that the Fed can carry out their responsibilities without political interference, would actually impend any of his infantile impulses to control and dominate?

  3. Joseph Harbin

    After the hardship of all that real-wage growth the past couple of years, you can see why voters had to vote for the Nazis in November. They had no choice but to kick the bums out.

  4. Murc

    As usual, this is good news and bad news. It's good news for workers but bad news for the Fed, which will take this as a sign of inflation and keep interest rates high.

    How is this bad news for the Fed?

    For real. Walk me through it. They see that there is healthy wage growth and that there is therefore no need for rate cuts. That's bad news why?

    I'm just. I'm so tired of everyone who wants it to be free money forever. That has very real negative economic and societal and policymaking effects everyone seems to want to ignore because "I want car loan with zero percent APR!"

    1. Anandakos

      It's because the last time that interest rates were "normal" for an extended period was during the boom around the Millennium when the accumulated Federal debt was 60% of GDP, not 100%. Already interest payments are larger than any other sector of the Federal Budget except Social Security. They exceed spending on Defense, Medicare and Medicaid.

      "Everything else" is piffle of course.

      So "things are different now", and not in a good way.

      1. KenSchulz

        When you reference the ‘boom around the Millennium’ do you mean the dot-com bubble or the mortgage/derivatives bubble?

          1. Creigh Gordon

            No, both courtesy of mortgage bankers who made ever-increasing mortgage and other loans to people who clearly didn't have means to pay them back, based on the fact that they made big origination fees and weren't concerned about unsustainable prices because they had no intention of being the ones holding the bag when it all fell apart.

            The bankers knew what was going to happen, but they only looked at the short term. As Charles Prince, CEO of Citi said later "When the music's playing, you gotta dance."

            1. d34df4n

              Absolutely right. It's truly amazing how few people (some of them otherwise intelligent) figured out that it was bankers and mortgage derivatives that were to blame all along. It probably didn't help that virtually none of the actual bad actors paid any price at all.

        1. Anandakos

          Does it matter? The point was that the gross interest expense as a percentage of GDP was three-fifths what it is now. When Federal revenues turn right around and go to bond-holders they can't go to more productive or at least desirable purposes.

          I agree that Federal bonds are necessary for our form of capitalism. They provide a pool of almost perfectly liquid holdings for banks and other providers of institutional capital. So "eliminating the National debt" would be stupid. But having it consume so much of the national income is dangerous. A "buyers' strike" could quickly cause interest payments to consume half of what the government takes in in taxes. There would be nothing left for the important things that it does as a neutral, unbiased provider of metrics from weather to crops to industrial production.

          Not to mention its central place in social safety net programs.

          We need to raise taxes and cut some programs sufficiently that the accumulated debt stops growing as a percentage of GDP.

    2. Creigh Gordon

      This is dumb. Banks lend money and charge interest because a certain number of car loans default, and the bank has to cover that risk and its costs. The Government doesn't make car loans.in fact it doesn't really make loans at all, it's certainly not concerned about somebody not paying it back. It makes payments for goods and services (and makes certain transfer payments like SS). Paying interest on Government liabilities is a legacy of having to protect the Treasury's gold supply, and under a fiat money regime it's just giving money to people because they already have money.

      Paying interest has much less to do with economic conditions, whatever they are, as it does with Chairman Powell's banker buddies wanting a return for parking money at the Fed or the Treasury. If they want a return on their money, let them do something useful with it.

      1. Anandakos

        Maybe you're right, maybe you're wrong. But the point is that "Chairman Powell's banker buddies" have the money that the government needs to meet its obligations in the absence of sufficient taxation. So whatever their evil or benign intent, they hold the high cards.

        1. Creigh Gordon

          Under a gold standard, the Government is to a real extent at the mercy of "bond vigilantes". With fiat money, we just make what we need. Currently we make some of it in the form of bonds, which are just "future money" printed, if you will, using the same machinery and out of the same thin air as any other form of government money. If we decide to mint trillion dollar coins or some other alternative instead of bonds, the banker buddies only choice is to take them or leave them, and they really can't leave them because they need the Government's money to pay Government taxes.

          Under a fiat money regime, the Government doesn't need the bankers' money in order to spend, it just prints what it needs. The shoe is really on the other foot: the bankers need the Government's money in order to pay taxes and the Government holds all the cards.

      2. jte21

        Why would you give the government your money if you got nothing in return? US bonds happen to be an attractive hedge because of their perceived security, but otherwise they're just another investment. It was simply inconceivable, until recently, that the US government would actually default on its debt. But offering people a chance to make some money on public debt as a way of covering its expenses (particulary for wars and the like) goes back to early modern England, and before that, to medieval Florence's monte commune.

        1. Creigh Gordon

          Actually, under a gold standard it's very conceivable that the Government could run out of gold and default. That is why the Government had to pay interest on its bonds, and the interest was based on that very risk. That risk no longer exists because we no longer offer conversion to gold.

          Alternatively, you may think that the bozos in Congress will do something really stupid. You may be right.

    3. Creigh Gordon

      Kevin probably should have said "[Wage raises for workers] is bad news from the point of view of the Fed" (because they think it will be inflationary and they will have to respond in ways that will be unpopular in some quarters?).

      For somebody in finance, good news is always bad news.

    4. jdubs

      Assigning puritan moral overtones to interest rate policy is bad thinking. There's no good outcome from this approach.

      High interest rates and making investments in the future more expensive are not morally pure and pristine. There is no moral purity in making investment more costly, lowering wages and increasing unemployment. This is bad thinking. Take the morality demonstration out of interest rate policy.

  5. SwamiRedux

    Wages are going up in anticipation of labor shortages that will be created by mass deportations. Thanks, Trump!

    Hahahahaha

  6. SnowballsChanceinHell

    I think it is extremely important to note that Kevin has talked for years about wage growth and inflation. And this is the first chart I recall seeing that shows a substantial decline in wages year-over-year.

    More typical was the chart shown in the following September 2024 post, which is shown in a post headlined "Wages have been outpacing inflation for five years."

    https://jabberwocking.com/wages-have-been-outpacing-inflation-for-five-years/

    Consider how different the chart in the September 2024 post would look if 2021 was taken as the base year, and not 2019.

    1. jdubs

      These are mostly compostional affects, not actual wage changes.

      This chart shows low wage workers being rehired in massive numbers, it does not show individual wages declining.

      The other chart you linked to is showing wages in a slightly different way and would not actually change much if the base year was shifted to 2021.

      Some will use the massive compositional workforce changes in 2020 and 2021 to make misleading claims about the wage changes that workers saw during those times. Also problematic is that sometimes the pandemic era stimulus checks show up as income boosts in 2020 and early 2021 and income declines after the stimulus is over.

      Both of these factors can be used to mislead people about the state of the economy and standards of living during that stretch. Don't add to the confusion.

      1. SnowballsChanceinHell

        Kevin offered the September 2024 chart to disprove the assertion that "inflation erodes wages and then workers struggle to catch up."

        Suppose you took 2021 as the base year. The wage growth trendline would be renormalized by the value in 2021 (1.07). The CPI trendline would likewise be renormalized to the value in 2021 (1.04).

        Do you believe that the renormalized trendlines would contradict--or confirm--the assertion that "inflation erodes wages and then workers struggle to catch up"?

        As for misinformation - Kevin posted this misleading wage growth chart, not me. Presumably because it supports the narrative that Democrats make hard choices and Republicans claim credit for the resulting benefits.

  7. D_Ohrk_E1

    Waiting for you to chime in on USDA prices of eggs and how they have dramatically soared. California eggs sold to retailers/producers are currently (Jan 17) $8.76/dozen. Stores are taking a loss selling for much less, though.

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