MBA Chart of the Week: Atlanta Fed Wage Growth Tracker

According to the Atlanta Fed’s Wage Growth Tracker (https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?panel=1) that effectively looks at median wage growth for a sample of repeat workers, wages have been increasing by 3 percent or more since early last year.

The wage increases are higher than reported elsewhere because the approach helps to control for cyclical and longer run changes to the employment pool by looking at a 12-month change in wage growth for individual workers in any given month.

When measured as the change in average wages, separate analysis from the San Francisco Fed showed that cyclical changes cause growth to appear higher as economic conditions deteriorate because lower wage earners typically experience higher rates of unemployment. Wage growth then underperforms in cyclical upswings as lower-wage workers re-enter the pool of employed workers. In addition, the gradual retirement of higher wage baby boomers is currently pushing the change in average wages lower.

Restricting the sample of workers to prime age workers reinforces this point–prime age workers have experienced higher wage growth in recent years. Improving labor markets will continue to be a significant driver of increased housing demand, especially among this cohort.

(Lynn Fisher is vice president of research and economics with the Mortgage Bankers Association; she can be reached at lfisher@mba.org. Joel Kan associate vice president of economic forecasting with MBA; he can be reached at jkan@mba.org.)