Unemployment accurately predicted wage growth before 2008: Unemployment rate and annual change in real wage growth, 1979–2007
| UR | RWC_2 | |
|---|---|---|
| 1979-Q1 | 5.9% | 2.0% |
| 1979-Q2 | 5.7% | 0.9% |
| 1979-Q3 | 5.9% | 0.7% |
| 1979-Q4 | 6.0% | -0.2% |
| 1980-Q1 | 6.3% | -1.0% |
| 1980-Q2 | 7.3% | -1.0% |
| 1980-Q3 | 7.7% | -1.5% |
| 1980-Q4 | 7.4% | -1.1% |
| 1981-Q1 | 7.4% | -1.0% |
| 1981-Q2 | 7.4% | -1.4% |
| 1981-Q3 | 7.4% | -1.5% |
| 1981-Q4 | 8.2% | -2.7% |
| 1982-Q1 | 8.8% | -3.3% |
| 1982-Q2 | 9.4% | -3.7% |
| 1982-Q3 | 9.9% | -3.8% |
| 1982-Q4 | 10.7% | -3.8% |
| 1983-Q1 | 10.4% | -3.4% |
| 1983-Q2 | 10.1% | -2.8% |
| 1983-Q3 | 9.4% | -2.8% |
| 1983-Q4 | 8.5% | -1.9% |
| 1984-Q1 | 7.9% | -1.8% |
| 1984-Q2 | 7.4% | -1.6% |
| 1984-Q3 | 7.4% | -1.2% |
| 1984-Q4 | 7.3% | -1.5% |
| 1985-Q1 | 7.2% | -1.4% |
| 1985-Q2 | 7.3% | -1.2% |
| 1985-Q3 | 7.2% | -1.2% |
| 1985-Q4 | 7.0% | -1.0% |
| 1986-Q1 | 7.0% | -1.1% |
| 1986-Q2 | 7.2% | -1.5% |
| 1986-Q3 | 7.0% | -1.4% |
| 1986-Q4 | 6.8% | -1.2% |
| 1987-Q1 | 6.6% | -0.7% |
| 1987-Q2 | 6.3% | -0.2% |
| 1987-Q3 | 6.0% | 0.1% |
| 1987-Q4 | 5.8% | 0.3% |
| 1988-Q1 | 5.7% | 0.0% |
| 1988-Q2 | 5.5% | 0.4% |
| 1988-Q3 | 5.5% | 0.4% |
| 1988-Q4 | 5.3% | 0.3% |
| 1989-Q1 | 5.2% | 0.7% |
| 1989-Q2 | 5.2% | 0.2% |
| 1989-Q3 | 5.2% | 0.1% |
| 1989-Q4 | 5.4% | -0.1% |
| 1990-Q1 | 5.3% | 0.1% |
| 1990-Q2 | 5.3% | 0.1% |
| 1990-Q3 | 5.7% | -0.1% |
| 1990-Q4 | 6.1% | -0.6% |
| 1991-Q1 | 6.6% | -1.3% |
| 1991-Q2 | 6.8% | -1.4% |
| 1991-Q3 | 6.9% | -1.6% |
| 1991-Q4 | 7.1% | -1.7% |
| 1992-Q1 | 7.4% | -1.6% |
| 1992-Q2 | 7.6% | -1.5% |
| 1992-Q3 | 7.6% | -1.4% |
| 1992-Q4 | 7.4% | -1.0% |
| 1993-Q1 | 7.1% | -0.5% |
| 1993-Q2 | 7.1% | -0.5% |
| 1993-Q3 | 6.8% | -0.4% |
| 1993-Q4 | 6.6% | -0.2% |
| 1994-Q1 | 6.6% | -0.1% |
| 1994-Q2 | 6.2% | 0.0% |
| 1994-Q3 | 6.0% | 0.2% |
| 1994-Q4 | 5.6% | 0.3% |
| 1995-Q1 | 5.5% | 0.2% |
| 1995-Q2 | 5.7% | 0.4% |
| 1995-Q3 | 5.7% | 0.6% |
| 1995-Q4 | 5.6% | 0.6% |
| 1996-Q1 | 5.5% | 0.8% |
| 1996-Q2 | 5.5% | 1.1% |
| 1996-Q3 | 5.3% | 1.0% |
| 1996-Q4 | 5.3% | 1.2% |
| 1997-Q1 | 5.2% | 1.2% |
| 1997-Q2 | 5.0% | 1.0% |
| 1997-Q3 | 4.9% | 1.3% |
| 1997-Q4 | 4.7% | 1.7% |
| 1998-Q1 | 4.6% | 1.8% |
| 1998-Q2 | 4.4% | 2.0% |
| 1998-Q3 | 4.5% | 1.9% |
| 1998-Q4 | 4.4% | 1.7% |
| 1999-Q1 | 4.3% | 1.8% |
| 1999-Q2 | 4.3% | 1.9% |
| 1999-Q3 | 4.2% | 2.1% |
| 1999-Q4 | 4.1% | 1.9% |
| 2000-Q1 | 4.0% | 1.9% |
| 2000-Q2 | 3.9% | 1.8% |
| 2000-Q3 | 4.0% | 1.6% |
| 2000-Q4 | 3.9% | 1.7% |
| 2001-Q1 | 4.2% | 1.4% |
| 2001-Q2 | 4.4% | 1.1% |
| 2001-Q3 | 4.8% | 0.6% |
| 2001-Q4 | 5.5% | 0.3% |
| 2002-Q1 | 5.7% | 0.0% |
| 2002-Q2 | 5.8% | -0.1% |
| 2002-Q3 | 5.7% | 0.4% |
| 2002-Q4 | 5.9% | 0.7% |
| 2003-Q1 | 5.9% | 0.9% |
| 2003-Q2 | 6.1% | 0.7% |
| 2003-Q3 | 6.1% | 0.5% |
| 2003-Q4 | 5.8% | -0.1% |
| 2004-Q1 | 5.7% | -0.3% |
| 2004-Q2 | 5.6% | 0.0% |
| 2004-Q3 | 5.4% | 0.0% |
| 2004-Q4 | 5.4% | 0.2% |
| 2005-Q1 | 5.3% | 0.1% |
| 2005-Q2 | 5.1% | 0.1% |
| 2005-Q3 | 5.0% | 0.1% |
| 2005-Q4 | 5.0% | 0.2% |
| 2006-Q1 | 4.7% | 0.4% |
| 2006-Q2 | 4.6% | 0.7% |
| 2006-Q3 | 4.6% | 0.7% |
| 2006-Q4 | 4.4% | 0.7% |
| 2007-Q1 | 4.5% | 0.8% |
| 2007-Q2 | 4.5% | 0.9% |
| 2007-Q3 | 4.7% | 0.9% |
| 2007-Q4 | 4.8% | 0.8% |
Note: Data are quarterly, with wage changes measured from the same quarter in the previous year. Nominal wages are deflated with a measure of expected inflation. This expected inflation uses the Consumer Price Index Research Series (CPI-U-RS). It uses 12 quarters of lagged inflation rates to obtain the expected inflation series. The most recent 4 quarters’ inflation rates are weighted at 12.5 percent each, inflation rates lagged five to eight quarters are weighted at 10 percent each, while inflation rates lagged nine through 12 quarters are weighted at 2.5 percent each. This expected inflation allows lagged inflation to be used to deflate nominal wages to represent “adaptive expectations” to inflation, but smooths out quarterly spikes.
Source: Unemployment rates are from the Bureau of Labor Statistics (BLS) Current Population Survey and wages are the average hourly earnings of production and nonsupervisory workers from the BLS Current Employment Statistics.
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