Tag Archives: wages

The Delayed BLS Employment Report Confirms the Labor Market Weakened Sharply Under Trump

Posted on by

Chart 1

A.  Introduction

The delayed Employment Situation report of the BLS for November 2025 was released on December 16, 2025.  It includes estimates of the job numbers also for October 2025 – figures that had not been compiled and released before due to the government shutdown.  The new figures confirm that the labor market has weakened substantially this year.

With this new data, this post will compare what happened to employment since Trump took office with its growth during the latter part of the Biden administration.  As seen in the chart above, there has been a dramatic slowdown.  Indeed, outside the health and social assistance sector, there are now fewer jobs in the economy than when Trump took office – 134,000 fewer.  There was still reasonable monthly job growth in the first few months of the Trump administration, as it takes some time before a new administration’s policies will have an impact.  Measured from April 2025 (the month that started with Trump’s “Liberation Day” with the announcement of his so-called “reciprocal tariffs”), the number of jobs in the entire economy other than in health and social assistance fell by 311,000.

These comparisons are based on the change in employment relative to what it was early in Trump’s term – from January and April, respectively.  More meaningful is a comparison to what employment would have been had it continued to grow from January at the pace it had in Biden’s last year in office.  Had that growth continued as it had under Biden, there would have been 1.2 million more jobs in the economy as a whole by November 2025 than in fact there were.

The turnaround from the robust growth in employment under Biden has been remarkable.

This post will focus on the job numbers as well as what has happened to the average wages paid to employees.  Both come from the Current Employment Statistics (CES) survey of the Bureau of Labor Statistics.  The CES data come from a sample of employers reporting to the BLS on the number of workers on their payroll at mid-month and the wages paid.

A follow-up post on this blog will examine the figures in the BLS report that derive from its survey of households – the Current Population Survey (CPS).  Figures on unemployment, characteristics of workers (such as age and race), and related issues can only be identified at the household level and thus come from the CPS.  The survey was not undertaken in October due to the government shutdown – so no estimates will ever be available for October – but the survey resumed in November and figures are now available for that month.  They also show a weakening labor market.

The first section below will look at the growth in total employment under Trump compared to what it was in the latter part of the Biden administration.  Early in the Biden administration (2021 and 2022), employment growth was far higher as the economy recovered from the sharp downturn in the last year of Trump’s first administration during the Covid pandemic.  But even when compared to the more steady growth in an economy already at full employment in the latter part of the Biden administration – as we will do here – Trump’s record is poor.

The section that follows will then examine what happened to the growth in average nominal and real wages of workers on employer payrolls.  While still growing – as they had under Biden – that growth slowed under Trump.  The penultimate section of this post will then look at the assertion made by Trump administration officials that BLS data show employment of native-born Americans soared in 2025.  They are wrong.  As numerous analysts pointed out already last August – when Trump officials first started to make this claim – the officials do not understand how the BLS figures are estimated.  As one of them – Jed Kolko – noted, their mistaken assertions “are a multiple-count data felony”.

A concluding section will compare what the new BLS figures actually show to what a White House press release asserted they show.  While one can expect any White House press release will try to put a favorable spin on newly released figures, the contortions they had to go through here are amusing.  In the end, they could only make up assertions that are simply not true.

As I was finalizing this blog post, the BEA released (on December 23) its first estimate of GDP growth for the third quarter of 2025 (i.e. July to September).  The estimate was of growth in real GDP of 4.3% at an annual rate when measured by the demand components of GDP – the measure that most people focus on.  Real GDP was estimated to have grown at a 2.4% rate when measured by the income components of GDP (with this measure of GDP referred to as Gross Domestic Income, or GDI).  In principle, the two measures (GDP and GDI) should come out exactly the same, as whatever is produced and sold will be someone’s income.  But typically they do not due to measurement error and statistical noise.  The 4.3% growth rate is certainly high, and the highest since the third quarter of 2023 when real GDP grew at a rate of 4.7%.  Estimated inflation in the third quarter of 2025 was also high, with the price index for GDP rising by 3.8% at an annual rate – up from 2.1% in the second quarter and 3.6% in the first, and the highest since 2023.  The core Personal Consumption Expenditures price index (i.e. the price index excluding food and energy items) rose at a rate of 2.9% – an increase from the 2.6% rate in the second quarter and above the Fed’s target rate of 2.0%.

This high rate of real GDP growth (when measured by the demand components of GDP) is especially surprising given the lack of significant growth in employment.  For a proper comparison, one should compare the growth in GDP to the growth in average employment in the third quarter (the average number employed in July to September) over that in the second (the April to June average).  Between those periods, average employment rose by 0.2% (at an annual rate).

No one really knows why this first estimate of GDP growth in the third quarter was so much higher than the growth in employment in that period.  With labor productivity growth of 2% per annum (not far from the long-term average in the US before around 2008), then to get real GDP growth of 4% would require additional employment of about 2% (using rounded figures).  But as noted, employment grew only at a rate of 0.2% in the third quarter.

There are many possible reasons.  I may put up a post on this blog to discuss such issues, and on the new GDP report more broadly.  This current blog post will remain focused on what has happened to employment this year.

B.  Growth in Employment

Chart 1 at the top of this post shows average monthly growth in total employment since May 2023 and in the monthly average outside of the health and social assistance sector.  Growth from the May 2023 date was chosen as the unemployment rate reached a trough in the prior month of just 3.4% of the labor force – the lowest unemployment rate in more than 50 years.  The economy was then at essentially full employment through the end of Biden’s term.  Four-month averages are taken to smooth out the normal month-to-month fluctuation in the figures (due in part simply to statistical noise), with a three-month average for the September to November 2025 figures.

The figures come from the CES survey of employers on the number of employees on their payroll (as of the payroll period that includes the 12th day of each month).  The survey does not include those employed in the farm sector.  Thus the figures are more properly referred to as the “nonfarm payroll”.  But since agriculture employees account only for 0.8% of the labor force (based on CPS numbers), the difference – especially when looking at month-to-month changes in employment – is not significant and is typically ignored.  Of much greater significance is that the nonfarm payrolls also exclude the self-employed in unincorporated enterprises.  The self-employed account for 6.0% of the labor force (based again on CPS data).  One cannot know if they are self-employed by choice or because they cannot find a job on some firm’s payroll.

Employment growth during Biden’s term in office was high.  Total employment grew at a rate of 603,000 per month in 2021 and 380,000 per month in 2022 as the economy recovered rapidly from the downturn in the last year of Trump’s first administration.  But setting this aside and limiting the analysis to job growth during Biden’s term in office from May 2023, employment grew at a good and sustainable pace under Biden.  Total employment grew by 1.3% in 2024, in the last year of Biden’s term.

Employment growth then fell sharply under Trump, especially since May.  This is seen in Chart 1 at the top of this post.  Overall job growth in the economy as a whole fell from 217,000 per month in September to December 2024 under Biden, to 123,000 per month in January to April 2025, just 13,000 per month from May to August, and 22,000 per month from September to November.  And more than all of the growth in 2025 was due to growth in the health and social assistance sector.  Other than in just this one sector, job growth fell from 138,000 per month in September to December 2024 under Biden, to 56,000 per month in January to April 2025, and then to a fall of 48,000 per month from May to August and again a fall of 40,000 per month from September to November.

Trump’s policies of high tariffs and other measures have also failed in their stated aims of raising employment in the manufacturing sectors and in particular in the motor vehicles sector.  Jobs in manufacturing fell by a total of 58,000 between January and November 2025, while jobs in the motor vehicles sector fell by a total of 15,000.

Trump’s press people have also been proud to assert that “100% of the job growth” under Trump “has come in the private sector”.  It is true that job growth – such as it was – was greater in the private sector than in the economy as a whole (i.e. including the public sector).  But the reason is that while the growth in private sector jobs fell in the first ten months of Trump’s term in office by 45% compared to what it was during Biden’s last ten months in office, total employment in the economy as a whole fell by an even greater 68% under Trump:

Chart 2

It is not clear why this is a record one should be proud of.  It is true that public sector jobs – particularly in the federal government – have fallen under Trump.  This was a consequence of the chaotic federal job cuts that Trump empowered Musk and DOGE to force through.  But the federal workers who were dismissed have not been able to transition easily to private employment in a robust job market.  Private employment grew at a far slower pace than it had before.

Another issue to consider is the extent to which Trump’s policies to deport migrants in the US and block new ones from entering the country may account for some share of the reduction in employment in 2025.  There is little doubt that it accounts for some share of the fall, but when one looks at the numbers, it is clear it can only account for a small share of it.  There is also no indication that the reduction in the number of migrants employed led to greater employment of native-born Americans – at least at the aggregate level.  The unemployment rate for native-born Americans rose in 2025.  It did not fall, as it would have if migrants taking jobs had kept native-born Americans from finding employment.

I will address these issues related to migrants in the labor force in the penultimate section below.  But first, we will look at what has been happening to the growth in nominal and real wages under Trump.

C. Nominal and Real Wages

In addition to the employment figures, the CES survey of employers gathers data on the average wages paid by the surveyed firms.  From this the BLS can calculate what has happened to average nominal wages.  Coupled with estimates for inflation (the CPI – also estimated by the BLS), one can then obtain an estimate of what has happened to average real wages.

By definition, such changes need to be measured over some period of time.  Using changes over the same month one year earlier, one has:

Chart 3

Over this period, average nominal wages over the same month in the previous year grew at a pace of between 4.0 and 4.2% in the period leading up to the end of Biden’s term in office.  In more recent months, that growth has slowed to a pace of 3.5% to 3.7%.  The change is not huge, but it is on a declining trend.  The 12-month increase in the CPI has varied more – within a range of 2.4 and 3.0% over the period – going up some over the 12 months ending in January 2025, then declining in the 12 months ending in March to May, and then rising again.  The 12-month increase in real wages – the combination of the changes in nominal wages and in inflation – has since May been on a falling trend.

A few cautions should be noted regarding the recent data.  First, no CPI data was collected for October 2025 due to the government shutdown.  For the calculations here, I assumed the CPI index for October was simply the average of the estimates for September and November.  Second, analysts have noted that the November data for the CPI should be treated cautiously as it may be biased low.  The figure published indicated inflation as measured by the overall CPI was 2.7% over the year-earlier period, when most analysts were expecting an increase of 3.0 or 3.1%.  Two main issues have been highlighted.  First, some specialists on such data believe that inflation in the Shelter component of the CPI (which accounts for 35% of the overall CPI index) may have been underestimated due to an assumption (possibly implicit) of zero inflation in October in the Owners’ Equivalent Rent of Residences component of Shelter (accounting for three-quarters of the Shelter index).  No data had been gathered for October due to the government shutdown, but whatever it may have been was almost certainly not zero.

Second, field data on prices only began to be collected on November 14, when the federal government reopened.  That meant that the November data used to estimate inflation came only from the second half of the month.  That meant that a higher than normal share of the prices would have come from a period when many items are on sale due to the holidays (Black Friday and such).  While seasonal adjustment factors for November would normally take into account the late November sales, they would have undercompensated this year as the historically determined seasonal adjustment factors are estimated for the month as a whole, not just for the second half of the month.  That is, had the BLS been able to collect data over the full month rather than just the second half, the resulting inflation estimate may have been higher.

It is difficult to know how significant these possible biases in the CPI data might have been.  But while we cannot estimate the magnitude, they point in the direction of a higher rate of inflation.  At a higher rate of inflation, real wages in October and November grew by something less than what is shown in Chart 3 above.

But even without such corrections, real wages have not been rising as fast as they were before.  They are still increasing, but at a somewhat slower pace.  That pace has certainly not risen.

D.  The Impact of Immigrants

One factor that will account for a share of the lower employment figures in 2025 (relative to the trend under Biden), will be the reduction in immigrant labor due to Trump’s aggressive policies on migration.  Immigrants resident in the US (often long-time residents in the US) are being deported, while new immigration is being blocked (other than by White South Africans).

A first question is how large an impact this might have.  It is difficult to come up with hard data on this, but perhaps the best estimate can be found in a study published by the American Enterprise Institute (a center-right think tank in Washington, DC).  It came out in July 2025 and is thus a forecast of what net migration may be in the context of Trump’s new policies.  Estimates are provided for 2025 as well as the next several years.

It provides its estimates as a range.  For 2025, it estimates that net migration may be somewhere between net outward migration of 525,000 and net inward migration of 115,000.  That is a broad range, but gives a sense of what the magnitude may be.  One must then make several adjustments.  First, multiplying by 11/12 as November is the 11th month of the year, the range would be (with all figures rounded) net migration of – 480,000 to + 105,000.  Second, these are figures for the total number of migrants, not just those employed.  It will include spouses, children, university students, retirees, and others not seeking employment.  Among adults, the labor force participation rate has been around two-thirds.  Adjusting for children, the share is likely less than half.  Assuming one-half, the range is then – 240,000 to + 52,500, with a mid-point of – 94,000.

That is, with Trump’s policies in place, the net outmigration of workers in 2025 may be on the order of perhaps 100,000, although perhaps up to 240,000 or even a net inmigration of 94,000.  While not trivial, these figures are small compared to the reduction in employment of 1.2 million that one has seen under Trump (through November) compared to what it would have been had employment continued to grow as it had during Biden’s last year in office.  And 100,000 fewer workers is just 0.06% of the US labor force of over 171 million.

Net outmigration of that magnitude – or even several times that magnitude – is too small to have a major impact on the number of native-born American citizens employed.  Further, the unemployment rate of native-born Americans has been rising in 2025 rather than falling – from a rate of 3.8% in November 2024 to a 4.3% rate in November 2025.  This will be discussed further below.

There is thus no evidence at the macro level that employing fewer migrants has led to an observable increase in employment of native-born American citizens.  What has happened instead under Trump’s policies is that some number of migrants – who had been working at jobs and paying their taxes (including Social Security taxes, even though they will not be eligible for Social Security benefits) – will no longer be producing goods and services for the American economy.  That work – at the overall level – is just not being done.

Trump administration officials have nevertheless repeatedly claimed that BLS data can be used to show that the number of native-born Americans employed jumped dramatically in 2025.  They are wrong.  They do not understand how the BLS data are constructed.  Jed Kolko, a senior fellow at the Peterson Institute and who has explained their error in detail, has called those assertions a “multiple-count data felony”.

A full explanation will not be provided here.  It is a technical issue, and a mistake that non-specialists can make if they are unfamiliar with how the BLS estimates are constructed.  Dean Baker provides an easy to follow explanation of the issues here ahd here, while Jed Kolko explains the issues in more detail here and here.

Briefly, the figures often cited (incorrectly) come from the standard Table A-7 of the BLS monthly Employment Situation report.  That table provides figures from the CPS survey of households for native-born citizens and separately for the foreign-born (whether citizen or not) on the adult population, the number in the labor force, the number employed and unemployed, those not in the labor force, and the unemployment rate as well as the employment/population ratio.

The issue arises because the population controls to go from the survey results to the aggregate figures for the adult population as a whole are set annually and then not changed.  These controls for the total adult population (native and foreign-born together) come from the Census Bureau, and it is then forecast to grow at some steady rate from month to month over the year from the figure fixed in January.

There are then two major problems.  One is that when the population control figures are updated each January, the BLS does not go back to revise the CPS estimates (on anything) in the prior year.  Thus the BLS clearly warns people not to make comparisons of figures on totals (such as the number employed) from one year to the next (such as between November 2024 and November 2025).  In contrast, the number employed in prior years in the CES estimates – the nonfarm payroll estimates – are revised each January when the population and other controls are updated.  That is why figures such as those above in Charts 1 and 2 are comparable over time.

The second major issue is that the BLS estimates the number of foreign-born in the adult population from figures obtained through the CPS, and then calculates the number of native-born by subtracting the foreign-born from the estimated population totals.  Thus if the number of foreign born respondents in the CPS household survey goes down in some month (which might happen because those in the household were deported, or were worried they might be deported if they responded honestly and hence decided either not to respond at all or to indicate they were native born – understandable given that the Trump administration has openly violated the confidentiality rules that are supposed to apply to such surveys), then the BLS estimate of the number of foreign-born in the adult population will go down.  And since the totals for the adult population derived from the Census Bureau figures each January are not changed (but rather grow from month to month at some pre-set level), a smaller estimate for the foreign-born population from the CPS responses will lead by simple arithmetic to an increase in the figure provided for the native-born population.

Year-to-year comparisons of the number of native-born Americans in the BLS figures can thus jump around and are not meaningful.  For example, between November 2024 and November 2025 the figure for the adult population of native-born Americans jumped by 5.3 million, or 2.5%.  The year before (November to November) it grew by 346,000, or 0.2%.  And the year before that by 1.9 million, or 0.9%.  In reality, the native-born population of adults in the US does not jump around like that from one year to the next.  As Kolko has said, to make such year-over-year comparisons in these BLS figures is a “multiple-count data felony”.  The error in such comparisons will carry over to comparisons across years in the labor force and employment figures.

As Kolko has noted, the most meaningful way to track what may be happening to the native-born and foreign-born populations in the labor market is to look at their reported unemployment rates.  These rates come directly from the household surveys, are independently determined for each, and will indicate whether employment prospects are improving or worsening.  An issue is that none of the figures in the BLS Table A-7 of its monthly Employment Situation report are seasonally adjusted.  Thus the month-to-month reported changes in the unemployment rates will vary due to seasonal effects.  It is better (although still not ideal) to compare the reported unemployment rate to that of the same month the year before.  And these have been going up in 2025 for native born Americans.  The November 2025 rate was 4.3%, up from 3.9% in Novermber 2024.

A seasonally adjusted series would be more useful to track the trends.  Jed Kolko has calculated an estimate of this for the unemployment rates of the native-born and foreign-born, using standard software for making seasonal adjustments from historical data.  The estimates he has released go through July 2025, and show a rising trend in 2025 (and since mid-2023 in his chart) for the unemployment rate of the native-born labor force.  While there is still a good deal of month-to-month fluctuation in the figures, the trend is basically the same from mid-2023 to mid-2025.  That is, Trump’s aggressive policies on immigrants have not affected this trend.

Trump administration officials continue to claim that the BLS data show that the employment of native-born Americans soared in 2025.  Despite analysts pointing out already last August the error in making such year-to-year comparisons in the BLS CPS data, Trump administration officials continue to make this mistake.  It would be understandable that originally they may have misunderstood the basis of the BLS figures.  It is a technical issue, and non-specialists would likely not be aware of it.  But by failing to correct their understanding of the issue once it was pointed out to them, their continued and repeated claims (most recently for the November figures) can only be viewed as moving from misunderstanding to misrepresentation to outright lying.

E.  Summary and Conclusion

The labor market has weakened substantially this year.  Employment had been growing at a good pace under Biden.  But in the first ten months of Trump’s second term in office, the country ended up with 1.2 million fewer jobs than there would have been had they grown at the pace achieved during Biden’s last year in office.  And if one excludes just the growth in employment in the health and social assistance sector, there were 134,000 fewer employed by November than there were in January, and 311,000 fewer compared to the number that were in April.

Trump’s deportations and other aggressive policies on migrants likely accounted for some share of this drop in employment.  But the fall in employment under Trump (relative to what it would have been had it continued to grow as under Biden) has been far more than can be accounted for by fewer migrants being employed.  And there is no evidence that fewer migrants being employed led to more native-born Americans being employed.  The unemployment rate of native-born Americans has gone up under Trump.  Furthermore, the growth in nominal and in real wages has diminished under Trump.  Deporting migrants did not lead to higher wages for those remaining.

Trump’s White House claims otherwise.  The White House press release issued on the day the BLS Employment Situation report for November was released opened by saying (in bold in the original):

“The strong jobs report shows how President Trump is fixing the damage caused by Joe Biden and creating a strong, America First economy in record time. Since President Trump took office, 100% of the job growth has come in the private sector and among native-born Americans — exactly where it should be. Workers’ wages are rising, prices are falling, trillions of dollars in investments are pouring into our country, and the American economy is primed to boom in 2026.”
— White House Press Secretary Karoline Leavitt

Breaking this down by phrase, with then what has in fact happened:

The strong jobs report shows how President Trump is fixing the damage caused by Joe Biden and creating a strong, America First economy in record time.:  Not true.  Job growth was substantial under Biden, and this growth then collapsed under Trump.  By November, there were 1.2 million fewer jobs under Trump than there would have been had growth continued at the pace it had in the last year of Biden’s term.

Since President Trump took office, 100% of the job growth has come in the private sector:  The growth in private sector jobs was 45% less in the first ten months of Trump’s second term in office than it was in the last ten months of Biden’s term in office.  Private job growth was greater than job growth in the economy as a whole (including the public sector) only because that growth fell by an even greater 68% under Trump.  This is not a record to be proud of.

and among native-born Americans — exactly where it should be.:  As explained in Section D above, this conclusion is based on a mistaken understanding of how the BLS figures on employment of the native-born and the foreign-born are estimated.  Such year-to-year comparisons are not meaningful.  What we do know from the BLS figures is that the unemployment rate of the native-born labor force has gone up in 2025.

Workers’ wages are rising,:  They are rising at a slower rate than they were during the Biden administration.

prices are falling,:  No.  Prices are rising.

trillions of dollars in investments are pouring into our country,:  While not something addressed in the BLS report, this reference is to promises made by various countries – as part of their trade negotiations with the Trump administration – to increase their investment into the US.  Figures “promised” range up to $1.4 trillion (by the United Arab Emirates), $1.2 trillion (by Qatar), and $1.0 trillion (by Japan), along with promises from other nations as well.  The investments would largely be made by private firms from the respective countries, even though it is not clear how public officials can commit their private firms to make investments of the magnitude promised.  The time frames are also not always clear.

There is no evidence that such investment is “pouring into” the US.  They are certainly not “pouring into” new fixed investments being made.  Total private fixed investment expenditures in the US from all sources (almost entirely domestic) were only $126 billion higher in the first three-quarters of 2025 than they were in the last quarter of 2024.  This is far from “trillions” even if it were entirely by foreign investors (which it was not).  Unless the vision is that foreign investors will displace domestic American investors – and take over control of the American economy – foreign investment of such magnitude will never happen.

Nor is it something most would want.  Recall the worries in the late 1980s (such as depicted in the popular book and movie Rising Sun) that Japanese investment would soon take ownership and control over significant assets in the US.  Recall also the concerns that arose after Japanese investors had purchased existing assets such as Rockefeller Center, Columbia Records, and the Pebble Beach Golf Course.

If anything close to the scale of investments by foreign firms the Trump White House is citing eventually materialize, the Japanese investment in the late 1980s will look puny.

Furthermore, for such foreign investment into the US to materialize on anything close to the scale the Trump White House is claiming, the trade deficit of the US would have to increase sharply.  This is the exact opposite of the claim that the negotiated trade agreements will lead the US trade deficit to go down.  Foreign investors will only be able to get the dollars to make the additional investments in the US if the US imports more from others.  This illustrates the confusion and lack of coherence in the Trump administration’s trade policies.

The discussion is, however, academic.  There will never be anything close to an increase in foreign investment into the US at the scale being claimed.

and the American economy is primed to boom in 2026.:  That remains to be seen.

Real Wages of Individuals Under Obama, Trump, and Biden

Posted on by

There have been repeated assertions by Trump during the presidential campaign (as well as by Vance in the October 1 debate between the vice presidential candidates) that people’s wages were higher under Trump than they now are under Biden.  What has in fact happened?

The chart above shows how indices of the real wages of individuals have moved during the last two years of Obama’s presidency, the four years of Trump’s presidency, and Biden’s presidency through to August 2024 (the most recent data available as I write this).  There is much to note, but first a few words on the methodology.

The primary data comes from the “Wage Growth Tracker” website provided by staff at the Atlanta Fed.  It makes use of data generated as part of the Current Population Survey (CPS) of the Bureau of Labor Statistics.  From the way the survey is designed, they can obtain data on the wages earned by each household member at a point in time and again for that same individuals twelve months later.  From this raw data, staff at the Atlanta Fed calculate for the individuals in the matched households how much their wages changed over those twelve months.  Since the CPS also collects information on the individuals themselves, they can also then determine what the average (as well as median) changes in wages were for individuals grouped by various characteristics, such as age or gender, race, education, occupation, and more.  The chart above shows both how real wages changed for workers as a whole, as well as the changes with wage-earners grouped by quartile of wage income, from the lowest to the highest.  The figures shown here are for the medians in each category.

The Atlanta Fed wage data goes back to December 1997, is presented in terms of the 12-month percentage changes, and is in nominal terms.  I converted the data to real terms based on the change over the same 12-month periods in the overall CPI (formally the CPI-U, produced by the BLS), converted this to an index number, and then rebased this to set January 2021 equal to 100.  The result is the chart at the top of this post.

In interpreting these figures, it is critically important to recognize that they reflect what households actually experience in terms of the changes in their individual wages.  This differs from what one will normally see when reference is made to changes in mean (i.e. average) or median wages.  The figures in the chart track the experience of individuals, and individuals will normally see their wages start relatively low – when they are young and inexperienced – and then grow over time as they gain skill and experience.  That is the normal life cycle.

Statistics on wages as normally presented, in contrast, measure not what the experience is of individuals, but rather movement in the overall mean or median wages of all those in the labor force at the time.  Changes in such wages will normally be less than what one observes for individual wages, as the labor force is dynamic, with young people entering (at normally relatively low wages) while older people retire and leave the labor force (at normally relatively high wages).  This will reduce the measured growth in average wages as higher-wage workers have left while lower-wage workers have entered.  While this change in the average wage of all those employed at each point in time is a useful statistic to know, it does not reflect the lived experience of individuals, who normally see their wages grow over time (at least in nominal terms) as they gain experience and hence ability.

One sees a consequence of this in the chart above.  Those in the lowest quartile of the distribution of wage earnings have seen growth in the wages they earn as individuals that is greater than the percentage increases of those in the higher quartiles.  This is because those starting out in the labor force – and entering at relatively low wages – generally see a relatively fast rate of wage growth as they gain skills and are promoted.  This slows down over time, with older workers still receiving annual wage increases (in at least nominal terms) but not as large in percentage terms as young workers do.

Tracking the real wages of individuals is therefore of interest, but cannot then be used to track over long periods of time what has happened to average (or median) wages.  But for periods of several years, as well as for a comparison of growth in some early period to growth in a similar later period, tracking as in the chart above is of greater interest than what has happened to average or median wages of an always changing labor force with young workers entering and older workers leaving.  It is useful in comparisons of the growth in wages between presidential terms.

With this understanding, a number of points may be noted on individual wage growth in recent years:

a)  Individual wages in real terms were rising at a reasonable rate in the last few years of the Obama administration.  They then grew at a similar rate (not a faster rate) during the first three years of the Trump administration prior to the disruptions due to Covid.  In fact, the growth rate of overall individual wages (as measured at the medians) was 1.4% per annum in real terms during the final two years of the Obama administration (January 2015 to January 2017), and then the exact same 1.4% per annum in real terms during the first three years of the Trump administration (January 2017 to January 2020).

Trump has repeatedly claimed that wage growth (as well as many other things) were the highest ever during his administration, but that is not the case.  The most that Trump can rightfully claim is that he did not mess up the growth path that Obama had put the economy on following his reversal of the economic and financial collapse that began in 2008, in the last year of the Bush administration.

b)  With the onset of the Covid crisis in early 2020, individual real wages in fact rose despite the chaos of the lockdowns.  This might appear perverse, but in fact makes sense.  First of all, the rate of unemployment shot up to 14.8% – the highest it has been since the Great Depression (so Trump now owns this record).  But 85.2% remained employed, and were employed under often difficult personal circumstances given the easy spread of Covid and a lack of preparation by the Trump administration for the approaching pandemic.  (Trump instead repeatedly stated that all would be fine; that the virus would quickly disappear; and that banning flights from China had been a great success in stopping the virus.)

Those who remained in their jobs during this difficult period were often compensated well for their willingness to do so.  They received significant increases in their wages and/or bonuses.  The alternative of unemployment was also not as bad as it normally would be.  Aside from the safety aspect of protecting yourself from exposure to Covid, programs for the unemployed at the time were more generous and more easily available than they normally are, due to special legislation passed to address the exceptional circumstances of Covid.  Workers had this alternative, and firms had to respond.  Firms also received often generous support through various special programs during this period, that enabled them to pay higher wages to the employees who remained on the job.

Thus one sees in the chart above that individual real wages in fact rose in 2020, despite of (or perhaps one should say because of) the Covid disruptions.

c)  The Covid disruptions continued into 2021 and the first half of 2022, while the special support programs for firms and the unemployed were scaled back to normal.  But supply chains had been radically disrupted globally due to the crisis, did not start to recover until vaccines became widely available, and then required time to catch up and normalize.  And while supply was constrained, demand rose more quickly starting in 2021 as shoppers returned.  This demand was especially high both because of pent-up needs or desires for items not purchased in 2020 due to the lockdowns as well as caution due to the easy spread of the disease, while personal savings were exceptionally high and could now be spent.  Savings (and bank accounts) were high due both to the lack of spending in 2020 and to the extremely generous financial support packages passed under both Trump and Biden.

Global supply chains then worked themselves out by mid-2022.  The rate of inflation had been relatively high before then due to the high demand confronting limited supply, but inflation as measured by the CPI index for all items other than shelter then fell dramatically from July 2022 once supply was no longer constraining.

This inflation was then reflected in the decline in real wages from early 2021 to the trough in June 2022, as seen in the chart above.  From January 2021 to June 2022 the overall individual real wage fell at a rate of 3.5% per annum.  But probably a more appropriate measure would be for the period from January 2020 (immediately before the Covid crisis) to June 2022.  Over this period, the overall individual real wage fell at a rate of 1.2% per annum.

d)  Once Covid and its related impacts were largely over in mid-2022, real wages immediately began to grow again.  And indeed, they have grown since then (through at least to August 2024 – the most recent data available as I write this) at a rate of 2.5% per annum.  This is substantially faster than the pace they had grown under Trump (as well as under Obama before him), although this can be attributed in part to a recovery from the decline in the period ending in June 2022.

With this recovery, the overall individual real wage is now back on average to where it was in January 2021.  And the real wages of those in the lowest quartile and in the second quartile of the wage income distribution are now significantly higher than they have ever been.  But the levels as of August 2024 should not be seen as especially significant in themselves.  August is simply the most recent data available.  Rather, what is significant is the strong growth seen in real wages since June 2022, with no sign yet that that strong growth is abating.  Eventually that growth will likely return to the longer-term growth seen under Obama and then in the first three years of Trump, but it is not there yet.

e)  One should also note that all these figures are for the medians over a diverse population.  While the overall figures (whether measured at the means or the medians) have gone up and down, the actual real wages of any given individual can be quite different.  While the median individual real wage is now back to where it was in January 2021, this will not be true for everyone.  That diversity in experience needs to be recognized and acknowledged.

 

Biden inherited an economy that had suffered the sharpest downturn and highest unemployment since the Great Depression.  Managing the onset of the Covid pandemic in 2020 would have been difficult for even the most competent of administrations, but the Trump administration was far from the most competent.  The impacts of that crisis – on supply chains among other effects – continued into 2021 and the first half of 2022, and they led to falling real wages over this period.  But as supply chains normalized, real wages began to recover.  As of August 2024, overall individual real wages are back to where they were in January 2021.  But more importantly, those real wages have been growing at a rapid pace since mid-2022 and as yet show no sign of slowing down.

Incomes by Field of Study for College Graduates: The Distribution Matters More Than the Average

Posted on by

There are numerous articles and studies on the average earnings of college graduates broken down by what they majored in when in college.  Some provide estimates for a comprehensive list of college majors, while some focus on the earnings of the top 10 or bottom 10 ten college majors.  Some focus on earnings soon after college graduation, some on earnings at mid-career, and some on earnings over a lifetime.  And some use private sources of data while others use publicly available data provided by the Census Bureau or some other government agency.  See, as examples, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, or here.

Also, some report average earnings while some report median earnings (where 50% of the individuals earn more and 50% earn less).  But all focus on such a single measure of the earnings a graduate might expect had they chosen to major in a given field of study.

This misses a lot.  No one earns the average nor the median.  There is, rather, a range of earnings above and below those average (or median) figures, and as we see in the charts at the top of this post, it is a very wide range.  The distributions overlap each other a lot, and the peak share is not all that high.

In the examples presented above, the average wage and salary earnings of those who majored in Business ($97,100) are more than a third higher than the average earnings of those who majored in one of the fields in the Liberal Arts & Humanities ($71,600).  (The source of the data for these estimates is discussed in a note at the end of this post.)  But despite the average for Business majors being more than a third higher, the earnings at the top end (the top third, say) of those who majored in one of the Liberal Arts & Humanities fields were far higher than the earnings of those who were at the bottom end (the bottom third, say) for the Business majors.

That is, it is not just the averages that matter.  It is much more important whether your earnings will be towards the top end of a given field rather than closer to the bottom end of some alternative field, even if average earnings in that alternative field may be higher.  The choices students make on what field to study in college can and should take this into account.

Instead of deciding to major in some field where the numerous articles available advise you may earn a higher income on average, it is far more worthwhile and consequential to decide on a field of study based on where you believe you can do well:  a field you can fully master and where you perform exceptionally well, and thus where there is good reason to expect you will be able to do better than others in that area.  Indeed, you should only major in a field where you have a sound basis for the belief you can be at or close to the very top in that field.

This will likely also be a field that you personally enjoy.  Expertise in a field and personal enjoyment in it usually go hand-in-hand.  You enjoy working in areas that you are good at.  And due to the broad overlap in the distributions of earnings across the different fields, this will likely also lead to far higher earnings than majoring in a field that one is not terribly good at, even if the average earnings in that field are higher.

There is, or at least there should be, of course much more than earnings to consider.  But this is a further reason to choose a field based on what one is good at, as that will likely lead to a more fulfilling career as well.

The most difficult part of this is determining what field of study will, in fact, be one where you are relatively good compared to others in that field.  The only way to discover this is to try a range of possible fields and see where you do well.  The first two years of college should normally be such a time of exploration, where you take courses in a range of subjects and see where you excel and where you struggle.  You will also see what you enjoy and what you do not.  And one should not be surprised if you end up choosing a field you had not expected.  Personally, none of my friends in college ended up majoring in the field they thought they would when starting out as a freshman, and nor did I.  There is absolutely nothing wrong with this.

The difficult part is recognizing where one can in fact perform near the top of those in the field and where you are fooling yourself.  Numerous studies have shown that people typically overestimate their skills relative to others.  For example, a now classic study from 1981 found that 93% of Americans in a sample believed they were more skillful car drivers than the median driver, and 88% were safer drivers.  Of course, only 50% can be more skillful, or safer, than the median.  The study has more recently (in 2023) been replicated, while a meta-study from 2019 confirmed the general problem:  Most of us feel we are better-than-the-average in many domains.

So how can we keep from fooling ourselves?  While not easy, the grades received in the range of courses taken when in the exploration stage of college should be an indication.  But for this, one needs to take challenging courses and not simply those where one can get a high grade without much in terms of effort or performance.  It also requires professors willing and able to provide grades that are true indicators of performance, and not simply uniformly high grades to everyone as the easy path to follow.  While it may not feel like it at the time, the most valuable gift one can receive is to get a poor grade in a field you are considering to major in but in which you in fact are not performing all that well.  It is far better to discover this when in college, rather than years later in a career in a field that you are not all that good at.

That is also why one should not pay much attention to an overall grade point average.  While grades in your senior year can demonstrate whether you have mastered the field, grades as a freshman or sophomore should reflect experimentation over a range of subject areas in those years, where some of those grades may be good and some not-so-good.

College should be a time of discovery – a time when you can explore many different fields and find out where you can in fact do well and where not.  It should be a time when you receive what I would term a true “education” by mastering in depth some particular field of study.  By the time of graduation one should have learned “how to think like a _____ ” (with the blank filled in based on the specific field).  That is, have you developed a deep and thorough understanding of the field?  Or have you basically only memorized some of its findings or conclusions, without a good understanding of how they were reached?  A career can be built on the former, but the latter soon dissipates.

 

=======================

Note on the Data:

The data for the charts come ultimately from the American Community Survey (ACS) of the US Census Bureau.  The ACS is an annual survey (with the most recently released data from 2022) based on a very large sample of about 2 million households interviewed each year.   While the Census Bureau provides easy access to tables based on the ACS for average figures, to obtain the full distribution of earnings – such as in the charts above – one needs to extract data from the Public Use Microdata Sample.  This provides, for a representative sample of the households surveyed, the full set of responses to the questionnaire at the level of the individual household.  One can then extract the wage and salary earnings of those individuals with a Bachelor’s degree who majored in a given field, and from this determine the full distribution of those earnings, not just the average.  I included all adults with a Bachelor’s degree at all age levels.

Operationally, I extracted the data via the IPUMS USA website (an institute based at the University of Minnesota – IPUMS is an acronym for “Integrated Public Use Microdata Series”).  IPUMS provides easy access to the ACS data through an online data analysis tool so no special statistical analysis software (such as SPSS or SAS) is required (although those are supported as well at the IPUMS site).  The IPUMS USA site includes data not only from the most recent ACS survey, but from each of the ACS surveys going back to 2000, and to the decennial US census going all the way back to 1790.  In addition, there are separate IPUMS sites for a range of other microdata files, both for the US and internationally.