The Week Ahead for week of July 1, 2013: A better stimulus is wage growth

June 29, 2013 

There is no shortage of ways to parse the monthly data on the American job market. Of course, the unemployment rate and payroll figures dominate the discussion. And while putting more Americans back to work is important, so is the size of those paychecks.

In May, the average working American was making $23.89 an hour. That's almost $43,000 per year based upon the average work week. By the Bureau of Labor Statistics measurement, the average American's earnings were up 2 percent in May compared to a year earlier. The June data will be released Friday.

It comes as other data show income growth has picked up, job growth has been steady, fewer people are filing for unemployment insurance for the first time, and home prices have been rebounding.

All of that helps underpin improving consumer confidence. In the twisted logic of the stock market, this data feeds confidence of the Federal Reserve moving closer to ending its extraordinary support to the economy. And that could be bad for investors.

But slowly rising wages aren't. The Federal Reserve may have some big financial guns, but those can't compare to the economic gunpowder of steadily increasing paychecks for workers.

While stock and bond traders may be freaked out by the realization that the central bank will inevitably have to taper off its stimulative efforts, the prospect of higher wages should be the source of economic encouragement for everyone.

Tom Hudson, a financial journalist based in Miami, is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter@HudsonsView.

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