Real Earnings Technical Note

Technical Note


    The earnings series presented in this release are 
derived from the Bureau of Labor Statistics’ Current 
Employment Statistics (CES) survey, a monthly 
establishment survey of employment, payroll, and hours. 
The deflators used for constant-dollar earnings series 
presented in this release come from the Consumer Price 
Indexes Program. The Consumer Price Index for All Urban 
Consumers (CPI-U) is used to deflate earnings for the all 
employees series, while the Consumer Price Index for 
Urban Wage Earners and Clerical Workers (CPI-W) is used 
to deflate earnings for the production and nonsupervisory 
employees series.

    Seasonally adjusted data are used for estimates of 
percent change from the same month a year ago for 
current and constant average hourly and weekly earnings. 
Special techniques are applied to the CES hours and 
earnings data in the seasonal adjustment process to 
mitigate the effect of certain calendar-related 
fluctuations. Thus, over-the-year changes of these hours 
and earnings are best measured using seasonally adjusted 
series. A discussion of the calendar-related fluctuations 
in the hours and earnings data and the special techniques 
to remove them is available at https://
www.bls.gov/opub/hom/ces/calculation.htm#seasonal-adjustment.

    Earnings series from the monthly establishment survey 
are estimated arithmetic averages (means) of the hourly 
and weekly earnings of all jobs in the private nonfarm 
sector of the economy, as well as of all production and 
nonsupervisory jobs in the private nonfarm sector of the 
economy. Average hourly earnings estimates are derived by 
dividing the estimated industry payroll by the 
corresponding paid hours. Average weekly hours estimates 
are similarly derived by dividing estimated aggregate 
hours by the corresponding number of jobs. Average weekly 
earnings estimates are derived by multiplying the 
average hourly earnings and the average weekly hours 
estimates. This is equivalent to dividing the estimated 
payroll by the corresponding  number of jobs. The 
weekly and hourly earnings estimates for aggregate 
industries, such as the total private sector averages 
printed in this release, are derived by summing the 
corresponding payroll, hours, and employment estimates 
of the component industries. As a result, each industry 
receives a "weight" in the published averages that 
corresponds to its current level of activity (employment 
or total hours). This further implies that fluctuations 
and varying trends in employment in high-wage versus 
low-wage industries as well as wage rate changes influence 
the earnings averages.

    There are several characteristics of the series presented 
in this release that limit their suitability for some types 
of economic analyses. (1) The denominator for the all 
employee weekly earnings series is the number of private 
nonfarm jobs. Similarly, the denominator of the production 
and nonsupervisory employee weekly earnings series is the 
number of private nonfarm production and nonsupervisory 
employee jobs. This number includes full-time and part-time 
jobs as well as the jobs held by multiple jobholders in 
the private nonfarm sector. These factors tend to result 
in weekly earnings averages significantly lower than the 
corresponding numbers for full-time jobs. (2) Annual 
earnings averages can differ significantly from the result 
obtained by multiplying average weekly earnings times 
52 weeks. The difference may be due to factors such as 
turnovers and layoffs. (3) The series are the average 
earnings of all employees or all production and 
nonsupervisory jobs, not the earnings average of "typical" 
jobs or jobs held by "typical" workers. Specifically, there 
are no adjustments for occupational, age, or schooling 
variations or for household type or location. Many studies 
have established the significance of these factors and that 
their impact varies over time.

    Seasonally adjusted data are preferred by some users  
for analyzing general earnings trends in the economy since 
they eliminate the effect of changes that normally occur 
at the same time and in about the same magnitude each year 
and, therefore, reveal the underlying trends and cyclical 
movements. Changes in average earnings may be due to seasonal 
changes in the proportion of workers in high-wage and 
low-wage industries or occupations or to seasonal changes 
in the amount of overtime work, and so on.

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