Contact Us



Up is Down: Jump in AHE Growth Confirms Economic Slowdown

The original version of this report was released to ECRI clients on April 2014 -

Earnings growth has risen for an unfortunate reason: growth in hours has fallen faster than pay growth. The chart below shows income growth slowing, and growth in hours worked slowing even faster.

Contrary to popular belief, such a slowdown is not a credible signal of an inflation upturn. And if the jump in wage growth pushes the Fed to be more hawkish, it could actually worsen the slowdown.

As we first publicly explained in May 2014, since AHE is the ratio of total weekly pay to total weekly hours, it’s useful to look at the growth rates of each, shown in the lower panel of the chart (purple and gold lines, respectively), which tells the real story. Following the post-hurricane pop, year-over-year payroll growth has edged up, while yoy hours growth has actually fallen back to its lowest reading since January 2017, excluding its September low, which was due to the hit from the hurricanes. So, rising yoy AHE growth may seem like a good thing, but in this case it is actually confirms the slowdown in economic growth that’s starting to take hold.

The bottom line is that the latest pop in overall AHE growth is not a sign of economic strength or inflation.

Related News & Events

The Dog that Didn't Bark

CNBC April 9, 2018

Unemployment is flat, yet it should be falling if the economy is as strong as most assume. More


Global Economy's Wile E. Coyote Moment

Bloomberg March 9, 2018

Groupthink on synchronized global growth upturn in danger of being blindsided by cyclical downturn getting underway. More


Jobless Rate Consistent with Slowdown

ECRI March 9, 2018

The unemployment rate has been drifting up, conforming to the economic slowdown that ECRI flagged earlier. More


Bond quality spread confirming looming economic slowdown

CNBC February 13, 2018

ECRI sees 2018 economic slowdown on tap, and bond market quality spreads agree. More


27th Annual Minsky Conference

Levy Economics Institute April 17, 2018

On April 17, Lakshman Achuthan will present at the Levy Institute's 27th Annual Minsky Conference.


Related Reports