by Calculated Risk on 7/19/2006 10:31:00 PM

Rex Nutting writes at MarketWatch: Bernanke overstates wage growth

Fed Chairman Ben Bernanke told senators Wednesday that he sees "some evidence" that wages are finally beginning to catch up with productivity growth ... "It's been slow coming. I want to be clear about that," Bernanke said of wage growth.

But the figures Bernanke used in his testimony were not accurate. At several points in his testimony, Bernanke overstated the growth of wages over the past few years.
...
To his credit, Bernanke told Sen. Elizabeth Dole, R-N.C., that the evidence for wages catching up "is not very overwhelming." He noted that "the average hourly earnings number is up about a percentage point this last year versus the previous year."

But even that underwhelming figure is wrong.

According to the Bureau of Labor Statistics, average hourly earnings are up about 3.9% in the past year. Once adjusted for the 4.3% rise in inflation, however, real average hourly earnings are down 0.5% in the past year. The wage figures cover about 80% of U.S. workers.

And on real compensation, Nutting correctly notes:

If you look at nonfarm business compensation per hour, you have real increases about 2.5% over the past few years," Bernanke said. "And if you look at real average hourly earnings, it's much closer to zero."

The first part of that is true, according to BLS statistics. Real compensation has risen 2.5% cumulatively in the past two years.

The second part of Bernanke's statement is misleading but also technically true: Real average hourly earnings are down 1.6% in the past two years, which is "much closer to zero" than 2.5%.

While real compensation has risen 2.5% in the past two years, productivity is up a cumulative 5.5% over that period.

By that measure, compensation is not catching up with productivity; it is still falling behind.

Kudos to Nutting.