Consumer wages are stagnant and will probably stay that way for a while. That was the verdict of the U.S. Labor Department. The Labor Department evaluated the average hourly earnings of non-supervisory and production workers in the private sector and found that wages are not moving much right now with only 3 cents an hour added in December compared to November 2009.
Hourly earnings have only gone up by 2.2 percent over the last year. This means consumers have actually lost ground because the Consumer Price Index for November 2008 to November 2009 rose 2.3 percent.
The Labor Department also looked at average weekly wages and found the same stagnation. The average weekly earnings have only gone up by $1. The figure now stands at $624.16 per week. Anyone trying to pay a mortgage, buy food and other essentials, cover utility bills, and pay for health insurance knows that stagnant wages can easily lead to a situation where bills cannot be covered with take-home earnings.
The expectation is that wages will not begin to rise anytime soon either. The economy has begun to recover but it is at a very slow pace. In fact, in December 2009 there were another 85,000 jobs lost confirming that economic recovery does not hold much for the average consumer right now in the way of financial relief. With so many people looking for a job it is expected that consumer wages would remain stable.
The Federal Reserve also issued a report that says consumer loans have declined by 8.5 percent as of November 2009. The declining credit figures were expected in view of the lack of available credit from lenders. Even Washington D.C. has been unable to convince the banks to loosen up credit. Between high unemployment rates and consumer efforts to reduce debt, the drop in credit is no surprise.
Consumers trying to make ends meet are living from paycheck to paycheck or unemployment check to unemployment check. People in high skilled jobs have the best hope of seeing wage increases because employers want to keep their skilled labor force. It is very costly to retrain workers.
Revolving credit fell by 18.5 percent on an annualized basis as of November 2009. Other loans, not including mortgages, fell by 2.8 percent on an annualized basis as of November 2009.
Some predictions say that state workers are the next class of employees who will see pay reductions. Many state workers across the country were able to keep their jobs and current pay intact thanks to federal stimulus funds. A number of states used the stimulus money to plug holes in state budgets and especially in education. In 2010 there is much uncertainty as to whether more funds will be made available to the states again. Much of the federal stimulus funding is being administered at the federal level.
Though debt reduction may not stimulate the economy, there are many analysts who believe it is imperative for consumers to lower their debt for long term financial health.
Tags: foreclosure, sector, stagnant wages, Mortgage, Consumer Price Index, labor department, average consumer, USD
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