What happened to the Biden Boom so many economists predicted? It happened, in terms of job growth, but many Americans haven’t felt it because inflation has outpaced wages until recently.
Susan Walsh, STF / Associated PressThe claim: "As inflation is coming down, take-home pay for workers is going up. Workers’ wages are higher now than they were seven months ago, adjusted for inflation." — President Joe Biden
PolitiFact Rating: Half True. Wage increases have outpaced inflation over the past two quarters. However, wages had fallen significantly behind inflation before that, and the recent improvements have not yet dug out of that hole.
Discussion
President Joe Biden on Jan. 12 faced reporter questions about the discovery of classified documents at his think tank’s office and his Delaware home. But he aimed instead to tout a positive development on an issue that has bedeviled his presidency: inflation.
Raw wages, unadjusted for inflation, have risen every quarter of Biden’s presidency, and generally at higher rates than wages rose under his predecessor, Donald Trump.
But once you adjust for inflation, many of these gains disappear. Real wages — that is, inflation-adjusted wages — fell or were unchanged during the first six quarters of Biden’s presidency.
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In the past two quarters, however, real wages turned a corner.
During the third quarter of 2022, real wages increased at a roughly 10 percent annualized rate. (An annualized rate multiplies a monthly rate of increase by 12 to project that rise over a whole year.)
Although that real wages metric hasn’t been released for the fourth quarter of 2022, annualized raw wages rose by almost 13 percent in that quarter, as inflation increased by less than 2 percent over the same period.
So, for the past two quarters, wages have outpaced inflation. That’s the point the White House emphasized when we inquired for this article.
But by the time of this turnaround, wages had fallen into a big hole on Biden’s watch — a hole the recent gains are only now starting to climb out of.
Over the past year, average hourly earnings for all private employees rose by 4.7 percent. But inflation rose by 6.4 percent during the same period. So wages lost ground to inflation.
And over the past two years — the entirety of Biden’s presidency — wages have cumulatively risen by 10 percent while inflation has risen cumulatively by 14 percent. So wages have trailed inflation for this period, too.
Dean Baker, co-founder of the liberal Center for Economic and Policy Research, said there’s a complicating factor for any comparisons of this sort. During the pandemic, real wages spiked — not because workers were getting raises, but because lower-wage workers were more likely to lose their jobs, and people who were still employed were unusually well-compensated.
When lower-wage workers got their jobs back in 2021 and 2022, it slowed wage growth, Baker said. But exactly how much is difficult to determine.
