Next month marks the 10th year since the Great Recession was officially over, although it wasn’t until September 2010 that the National Bureau of Economic Research made the announcement. Since then, numerous aspects of the economy gradually improved through the rest of Barack Obama’s presidency, and since Donald Trump began squatting in the White House.
But while the acute economic problems of that terrible downturn have vanished, most of the chronic ones that predate it remain. And, of course, many people who lost their jobs then are now employed but haven’t yet recovered from losing their homes, obliterating their savings, delaying or eliminating their offsprings’ college plans, or even making as much money as they were when the economy went south thanks in great part to well-paid rip-off artists whose only “punishment” was smaller bonuses for a couple of years.
Every month, Advisor Perspectives takes a look at what non-farm, non-supervisory, and production employees are being paid. They make up about 80% of all U.S. workers.
Using the Consumer Price Index for Urban Consumers to adjust wages for inflation and adding that to the average number of hours employees work, AP’s Jill Mislinski comes up with hypothetical real annual earnings. In 1964, the average work week was 38.8 hours. Now it’s 33.7. If pay had risen commensurately, that would be a good thing. A four-day work week would be a boon for all but the most committed workaholics. But that’s not what happened. Thus, today, taking the average work week and multiplying it by the average hourly wage, he comes up with average inflation-adjusted annual earnings of $39,277. That’s down 11.5% since the peak in weekly hours in October 1972. And that gross figure doesn’t take into account reductions for taxes or other deductions.
Hourly inflation-adjusted wages for four-fifths of the workforce—what economists label “real wages”—are now way above what they were in the depths of the Great Recession, but slightly less than they were at their peak 47 years ago. This is after a decade of economic growth since that recession officially ended in June 2009. Here’s the chart:
Multiplying the real average hourly earnings by the average hours per week produces average weekly real wages of $786. In the early 1970s, the peak was $846 a week.
There is no denying that a significant improvement has occurred over the past 10 years. But these calculations make it clear that, for most U.S. workers, the pay situation is not as good as it was before the majority of Americans alive today were even born.