Friday, January 15, 2010

Real Confusion

AP is reporting that real wages declined during 2009 but their lead sentence is quite confusing.

American families were squeezed last year as their inflation-adjusted weekly wages fell 1.6 percent — the sharpest drop since 1990 — well below the 2.7 percent consumer inflation rate.

Real wages decline if inflation exceeds the increase in nominal wages, which is what I think AP meant to say. This sentence, however, almost appears to compare some alleged increase in real wages to the increase in consumer prices.

BLS reports that average weekly earnings of production and nonsupervisory workers on private nonfarm payrolls in current dollars rose by 1.87% from December 2008 ($612.72) to December 2009 ($624.16) but when adjusted for inflation, their constant (1982) dollar weekly earnings fell from $288.12 to $283.58 or the reported decline in inflation-adjusted weekly wages. My math says this means the deflator had to rise by 3.5% over the same period not the reported 2.7%.


Min said...

{Sigh} Another example of rampant innumeracy in the media and culture.

Ken Houghton said...

If you look at CPI (Urban), the YOY change from Dec 2008 (210.228) to Dec 2009 (216.483) is 3.15%.

I can't find anything that indicates 2.7% for 2009.