December Real Earnings: Average Workweek Made the Difference

American employees in general earned more in December partly because they worked more, even with their hours seasonally adjusted. Real earnings are defined as the actual earnings increase, less the change in the price level. In December the Consumer Price Index was unchanged from November, so the movement in real earnings stemmed from other causes.

Don’t Miss: Housing Starts Fell 4.1% in December.

Thursday’s Real Earnings release from the Bureau of Labor Statistics for all employees, shows an increase in real average hourly earnings of 0.2% in December. Coupled with a 0.3% increase in the average workweek, these employees saw a 0.5% rise in their weekly real pretax incomes. Taking all of 2011 into consideration, the same employees worked on average 0.6% more per week, but their hourly pay decreased by 0.9%, giving them a 0.3% decrease in weekly real earnings. This trend seems to be reversing in December, perhaps due to the economy picking up steam.

For production and non supervisory employees in December, the pattern held but the numbers are a bit different. On average, these workers saw no increase in their hourly wages, but their workweeks increased by 0.3%, giving them a 0.3% increase in weekly real earnings. For the year 2011, real average hourly earnings for these employees fell by 1.6%, but their workweeks increased by 0.6%, so their average weekly pretax real incomes decreased by 1.0%.

This pattern is consistent with an economy coming out of a recession: when production increases, employers typically have their current employees work more hours before hiring new ones. Wages remain flat or rise very slowly until the availability of new applicants significantly diminishes, which necessitates raising offers. It does not appear that December’s economy is quite to that latter stage yet – the January and February figures should provide clarification.

Don’t Miss: December Consumer Price Index: Steady As It Goes.