Better Than Advertised

The BLS Quarterly Census of Employment and Wages, collected from unemployment claims data, provides the Labor Department with a comprehensive view of the jobs and earnings market for the U.S. economy.  The first quarter 2015 survey covered over 9 million establishments employing a total of over 135 million employees—around 98% of the total population of individuals on company payrolls. In contrast the non-farm payroll series surveys a small sample, 143,000, of the population of 9 million establishments.

The BLS QCEW data provide a tally for wage and salary income. They tabulate the number of employed and the total amount of income received. They infer a level of wages per employee. These tallies are the source data for wage income in the BEA tabulation of National Income in the NIPA accounts. The annual figures move tightly together, reflecting that linkage:


Source: BLS, BEA


There is, however, a quirk in the dissemination of the QCEW data. BLS has opted to share its quarterly tally with BEA before it releases the data to the general public. Thus the public sees BEA wage and salary income revisions before we see the revisions to the source data. This can make for days of interesting conjecture. Tuesday, November 24th, was just such a day.

BEA, on Tuesday, announced that wage and salary incomes rose at a 5.8% annualized rate, Q2:2015, much stronger than their initial tally of a 2.5% annualized climb. They dutifully acknowledge that this powerful revision reflected the news embedded in the Q2:2015 QCEW report. We will not see the QCEW report until mid-December.

Some combination of higher gains for employment and/or larger gains for hourly pay will account for this large upward revision.   On a year-over-year basis wage and salary income is now up 5.1%, versus 4.3%. Non-farm payrolls, as currently estimated, are up 2.2%. Wage rates are thus up 2.1%.

We have no hard evidence of how this upward revision might split between higher headcount and bigger increases in wage rates. The table below looks at three possibilities. If the entirety of the revision is embedded in a rise for wage rates, the year-on-year gain jumps to almost 3%, from 2.1%. An even split of the upward revision to wage rates and payrolls would translate to a 2.6% gain for wage rates and a sharp upward revision to monthly payroll gains in Q2:2015. Finally, if we assume non-farm payroll gains in Q2:2015 equaled the pace of advance in place in 2014, we would be looking at gains for payrolls of 260,000 per month, laid alongside a rise of 2.8% for wage rates. For what it worth, that rings true to us.

Any way you cut it, however, the circumstances for wage earners, Q2;2015, were much better than initially advertised.


Source: BLS, BEA