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The Inflation Beat
Q & A
Inflation Forecasting Methodologies
Methodology and Sources For Wages and Earnings
I derive the rate of inflation from the Consumer Price Index (CPI).  

The consumer price index, wages and weekly earnings data comes from The St. Louis Federal Reserve Bank's Economic Research website known as FRED .

FRED gets their data from the  U.S. Bureau of Labor Statistics  or BLS for inflation, wages and weekly earnings.

All I'm doing is comparing the year over year percent change in hourly wages and the weekly earnings Vs. the rate of inflation using the Consumer Price Index.


Here is a chart taken from FRED showing average hourly earnings in the private sector.
Average hourly earnings have been rising consistantly, but not always do hourly earnings rise faster than the rate of inflation.  

In order for the economy to be healthy and consumers to feel confident, it's helpful that the raise they may have received is at least as high or higher than the rate of inflation.

Below is a chart showing the year over year change in hourly earnings Vs. the year over year percent change in the consumer price index.  So on as the blue line, wages, is higher than the red line, the consumer price index, have the gains in wages BEAT the rate of inflation.  
Weekly Earnings

A very important variable to weekly earnings is the amount of hours worked in the given week.  When hours worked are rising, it's substantially easier to beat the rate of inflation.  However, as the economy slows, one variable that starts to decline is the amount of hours worked per week and that impacts the employees paycheck.

So here is a chart taken from FRED that shows the average weekly hours worked in the private sector:
Now all one needs to do is multiply the average wages by the average weekly hours to get the average weekly paycheck.  

Here is a chart taken from FRED that shows the average weekly earnings in the private sector:
Now here is a longer term chart showing the differance between the rate of change in weekly earnings minus the inflation rate.  As you can see, not always do weekly earnings BEAT the rate of inflation.  
Why This Is Important

When wage and weekly earnings are beating the rate of inflation, that means that consumers have more purchasing power than they did a year before.  It means that they can either save or invest more $ or can spend more in additional goods and services.

Consumer confidence is strong when the both the average hourly wages and weekly paychecks beat the rate of inflation and that's just overall good for the economy.

So watch to see if Wages and Weekly Earnings BEAT on the home page every month.
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