If the current nowcast is accurate, we will see some real wage declines, but not hospitality and leisure wages. If the PCE deflator is used, it is not even used for aggregation.
Figure 1 shows the salary converted to 2020 using CPI.
figure 1: The average hourly income of private sector non-regulated and production workers (black), manufacturing (yellow-green), leisure and hotel services (red), all in 2020 dollars/hour, sa, logarithm. Use CPI for reduction, and use Cleveland Federal Reserve 12/3 nowcast for observation in November 2021. NBER-defined recession dates are shaded gray from peak to trough. Source: BLS, Cleveland Federal Reserve, NBER and author’s calculations.
It is difficult to see how these levels compare to 2020M02 on this scale, so in Figure 2, I normalized it to the peak NBER level.
figure 2: The average hourly income of private sector non-regulated and production workers (black), manufacturing (yellow-green), leisure and hotel services (red) are all in 2020 USD/hour, log 2020M02=0. Use CPI for reduction, and use Cleveland Federal Reserve 12/3 nowcast for observation in November 2021. NBER-defined recession dates are shaded gray from peak to trough. Source: BLS, Cleveland Federal Reserve, NBER and author’s calculations.
Therefore, real wages in the overall and manufacturing industries are higher than the 2020M02 level, as are leisure and hotel services (above 5.2%).
Please note that people’s perception of the average gross salary depends on the deflator.
image 3: The average hourly income of private sector non-regulators and production workers is calculated on a logarithmic scale based on the CPI (black) and personal consumption expenditure deflator (blue-green), both are 2020 USD/hour, sa. In November 2021, the Cleveland Federal Reserve’s December 3 nowcast will be used for observation. NBER-defined recession dates are shaded gray from peak to trough. Source: BLS, Cleveland Federal Reserve, NBER and author’s calculations.
