Are You Better Off Than You Were in 1975?

Often lost in the discussion of the monthly employment situation is real earnings.

The standard for measuring hourly earnings is the Bureau of Labor Statistics series called: Average Hourly Earnings of Production & Nonsupervisory Employees – Seasonally Adjusted. We start with a table that summarizes nominal and real earnings for the last three months and from one year ago.

Table 1

While the near term numbers are interesting, we find looking at the charts of nominal and real earnings back to 1964 reveals a story not often mentioned by the financial media. The following chart plots both the nominal and real earnings of Average Hourly Earnings of Production & Nonsupervisory Employees – Seasonally Adjusted. We would draw your attention to the orange line in the upper panel. Notice that Real Average Hourly Earnings peaked in 1973.

Chart 1

The following two charts show a similar pattern for for real earnings of Goods Producing employees and Private Service Providing employees. The former peaks in late 1978 and the latter peaks in late 1972.

Chart 2

Chart 3

The following nine charts present the data for Average Hourly Earnings of Production & Nonsupervisory Employees – Seasonally Adjusted in a slightly different manner. They show how many hours of work it takes to purchase various items. The last round of serious inflation took place in the decade of the 1970’s, and most of our items are still below the peaks established for hours of work needed to buy those items in that time period. The one glaring exception: The S&P 500.

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