Thread by @jasonfurman

The Dallas Fed has an analysis that argues that real wages are up over the pandemic period. Not sure they're right (will look more closely). Regardless, they confirm the more relevant issues: real wages falling & below trend--so not a pretty picture.
dallasfed.org/research/econo…

1. The Dallas Fed researchers show that real wages have been falling over the last six months. That is relevant for how households evaluate the economy, even if they got (as indeed they did) real wage gains earlier in the expansion.

2. The Dallas Fed appears to be consistent with the strong evidence that any pandemic-era real wage growth is below previous trends: "real AHE growth that controls for composition effects has remained slightly positive over the past two years."

I like to show all data relative to trends. The Dallas Fed doesn't show what real wages were like before the pandemic but based on the "slightly" positive it is a good bet they are below trend.

3. Whether real wages are up or down in absolute terms over two years is less relevant question to evaluating how households are feeling or how they are doing objectively than these issues. Nevertheless, the study provides a less definitive answer to this question than it seems.

The Dallas Fed appears to define the "pandemic-era" as 2019-Q4 to 2021-Q4. What we really want to know is what happened from Feb-2020 to Jan-2022. This may sound picky but it's not (see next tweet).

This means the Dallas Fed is counting the real wage growth that happened in January and February 2020 as part of the pandemic period. And averaging 2021-Q4 reduces the weight on the the inflation in November and December. And it ignores January.

Nothing wrong with using quarterly averages, the data is very noisy. But whether or not real wages are up above zero or down below zero can be sensitive to these sorts of issues.

But again, whether or not real wage growth is above or below zero is not the most relevant question.

I prefer to look at the Employment Cost Index which is the only official government series that is adjusted for inflation. It shows real wages have been falling, are below trend, and also are down overall.

None of the above speaks to causes. Volatile changes in global prices like oil, eg, reduce real wages--but generally in a transitory manner that reverses. So can debate the causes and outlook.

But the facts on real wages just aren't that great no matter how you look at them.

P.S. Including transfers households did very, very well in 2020 & 21. Real wages do not answer the question of whether households are better or worse off. But they do tell us about the labor market. And they are relevant for thinking about well-being in 2022 post transfers.