To Put it Succinctly about Services: Everything Drops, incl. Jobs, but Prices & Wages Rise

The service sector, including finance & insurance, in the New York Fed’s district, reports rising prices and wages, despite further deterioration in business. Weirdest economy ever.

By Wolf Richter for WOLF STREET.

This is another moment in the Weirdest Economy Ever, driven by stimulus, forbearance, bailouts, record money printing, record government-deficit spending, exuberant financial markets, and record low costs of funding: For companies in the service sector, the service economy still sucks but now more so than in prior months, and these companies are still shedding employees but now faster than in prior months, and yet wages and prices are rising.

“Activity in the region’s service sector declined at an accelerated pace,” said the New York Fed this morning in its January 2021 survey of service sector companies in its district. The headline Current Business Activity index dropped five points to -31.8, the worst assessment of the service sector since June, which has now been on the decline for the 11th month in a row; and the decline has steepened over the past three months. Values above the blue line (zero) indicate improvement, values below the blue line indicate deterioration in this diffusion index (historic data via YCharts, current data via NY Fed):

Only 18.6% of the service sector executives in the survey reported that conditions improved during the month, and 50.5% reported that conditions worsened. The remainder reported “about normal” conditions (18.6% minus 50.5% = index value of -31.8).

The New York Fed’s district includes New York State, Northern New Jersey, and Fairfield County, Connecticut. This is where the finance & insurance sector is concentrated, among many other services. Services in general account for nearly 70% of the overall US economy.

The New York Fed sends the survey on the first business day of every months to the same pool of 150 top executives of services companies in its district, who respond based on their own company’s data. The names of the companies and executives are not released.

The business climate index has been abysmal since March. It’s based on the question, “How would you rate the current business climate for this time of year?” The index had dropped to -93 and -94 in April and May, the worst in the data going back to 2004, with nearly all executives reporting at the time that the business climate had worsened.

After getting less bad, so to speak, from July through December, but remaining at abysmal levels, the business climate in January worsened again, with the index dropping to -63.3. Of the executives, 12.2% said the business climate was better than normal, and 75.6% said it was worse than normal (historic data via YCharts, current data via NY Fed) :

Job cutting continues at these companies in the service sector. The index for the number of employees fell to -17.6, indicating a decline at the fastest clip since July, with only 11.8% of the companies reporting that the number of employees increased in the month, and with 29.4% reporting that the number of employees fell. This was the second month in a row that the decline in employment has steepened compared to the prior month (historic data via YCharts, current data via NY Fed):

Capital spending continued to fall, but at a slower pace. With the index at -14.2 in January, 14.7% of the executives reported that they increased capital spending, and 28.9% reported that they cut capital spending.

But wages are rising, despite declining employment. The index for wages rose to +19.9, the fastest increase since March: 26.2% of the companies reported rising wages and 6.3% reported declining wages; the remainder reported no change. It was only during April, May, and June that companies reported overall declining wages:

And input prices rose. The index for prices paid in the service sector in the New York District never actually declined during the Pandemic, though price increases came to a near-halt in April. Since then, price increases have picked up momentum. In January, the index rose to 38.9, indicating the fastest price increases since February 2020, with 42.5% of the companies saying they paid higher prices than the month before, and just 3.6% saying they paid lower prices:

And selling prices rose 8 points to 7.4, “the first sign of any significant selling price increases since the pandemic began,” the New York Fed said triumphantly, because inflation is what the Fed wants more than anything:

So the weirdest economy ever. The massive service sector in the overall US economy is of course what hasn’t fully recovered yet. The stimulus money sent to consumers drove spending on goods to historic highs, many of which are imported, with spending on durable goods spiking from record to record. But consumer spending on services continues to lag, and in November dropped again, and was down nearly 5% from a year earlier:


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  130 comments for “To Put it Succinctly about Services: Everything Drops, incl. Jobs, but Prices & Wages Rise

  1. qt says:

    One possible explanation is less folks doing more work as people are layoff or furlough. So you do 50% more work and get paid 15% more, yeah me. Also the demand side remains strong with low interest rate, stimulus, bailout, etc. So prices go up!

    I talked with a Director of Finance for Marriott Hotels (Bay Area). He said he had to layoff an assistant and other workers. The criteria is can you work multiple jobs? Can you multitasks more responsibilities? If yes, you get to keep your job. BTW, his wife complained to my wife that he worked till 8pm now everyday. He even worked weekend sometimes.

    • tom15 says:

      As a small business owner, this is typical.

      Busy times or recession times, you crank the hours.
      Bad times you cut the drama and/or lazy & keep the do it all,
      get er done people.

      Wall Street & Corp. won this time around. Taxes and regulations will
      be increasing for main street. For the survivors, should have a deeper
      labor pool to select from.

      For you youngsters, everyone is screaming doom & gloom, and the
      death of America. Yet I and the other grey hairs & baldies see a sea of
      opportunities. RISK. A generation has been taught to avoid.

      • Joe Saba says:

        I’m working more and getting paid for it
        also been able to hire decent workers – which I pay more for but in end they do better work in shorter time

      • RightNYer says:

        A generation has been taught to avoid risk? How do you figure? Young people today think stonks only go up!

        • Random Guy 62 says:

          Speaking on behalf of myself and another half dozen financially responsible friends you might call “young people”… we hate investing in this stock market right now. But where the heck else are we supposed to park that 10-15% of gross income for retirement?

        • Apple says:

          CDs pay 0.8%.

          Savings account even less.

        • RightNYer says:

          WHY people are investing in stocks is irrelevant. The point is there are many young people who are convinced that any downturn is temporary and that you can’t lose. That’s a recipe for disaster.

          But yes, I think ZIRP will ultimately ruin this nation.

        • roddy6667 says:

          Random Guy 62—Putting your retirement in increasingly riskier vehicles to chase a higher return will not end well. Some will get a higher RIO. Most will not. Some will lose most of their money. A prudent person does not play this game. The only option is to save a little more. A little austerity will pay big.

        • YuShan says:

          An underappreciated feature of cash (and equivalents) is that it possesses a certain “option value”: there is a non-zero probability that you will be able to buy assets with (massive) discounts in the future.

          It is annoying to get 0% interest and see your cash being hollowed out by inflation, but if 3 years from now you can buy the S&P500 for 50% or less of the price that it has now, that cash has offered you a massive return. Don’t say it won’t happen. The S&P500 has done -50% twice in the past 20 years and valuations have never been this extreme.

        • My thoughts too, the maskless generation, extreme sports, bitcoin, this is the generation for which the term ‘capital preservations’ is anathema.

    • Wisoot says:

      Fast track to heart attack or stroke working weekends. Dont sweat the small stuff. If everyone downed tools, change would happen overnight. To try to keep up with thieves is to run with the wolves from willoughby chase. Take a stand. Do nothing. Say nothing. Wait.

    • VintageVNvet says:

      This is very much part of the equation qt:
      Back in mid 1980s era , before any kind of computer other than System 36 or whatever it was ( IBM ”mainframe”) I was working for a medium size general contractor as estimator in an office with 4 other full time estimators, and very clearly ”all hands on deck” on bid days, when all office personnel were fully engaged, from owners/bosses right down to all the support people and all the field folks who could make it, about 25 total.
      By mid to late ”oughts” it was me alone and two or three others for support running faxes, etc. doing about 5 times the dollar volume of the 80s, so clearly way beyond inflation. (Though, to be sure, bosses/owners would come in late to review and give last minute margin instructions as always.)
      With bonuses, also was paid approximately 5 times more in the oughts.
      And knew many others approximately that same delta over that 20 years of increased outputs possible with computer advances.
      Very likely to continue with topcats (new one on me from another commenter on here) able to name their compensation based on their very clear worth no matter where they are working from/at.

      • NBay says:

        IBM 360 room…..ran my thin film interference filter app on it…..punch cards in…..x-y ink pen plotted graph out…..1970-71.

        Have no idea what IBM lady was doing with big white plastic disks and switches, just came into the room at my scheduled time, and if I blew it somewhere in the punch card deck and ran out of time…..left and rescheduled. Think she said I was using Fortran.

    • Heinz says:

      Another possible factor in paradox of higher wages facing off against job losses is the evolving WFA (Work from Anywhere) situation.

      I heard that one survey estimated that out of US work force roughly 30% of jobs lend themselves to WFA, while the other 70% of job holders must show up at work place (e.g. nurses, police, retail workers, pilots, construction and maintenance workers, etc).

      Of that 30% WFA contingent, I think top management may be busy trimming chunks of middle management, since they have less to manage these days vs. conventional office environment.

      So WFA will exact its pound of flesh on its workers in one way or another, it seems.

      • NBay says:

        Yeah. One day they will try to login and can’t. Then maybe they will get a manilla folder full of EDD stuff and other “helpful” suggestions from HR (if they are in an area with a good delivery profit margin) and start crying.

      • FDR says:

        It is called neo-feudalism. The vassals, lords and serfs that did not did not adapt to the ways of the new kingdom are supplanted by a new vassal or lord that is more aligned with the new kingdom. Those that don’t go along are cast aside, exiled, sent to the poor houses,

        Substitute vassals for supervisors, lords for managers, serfs for hourly,new kingdom for plutocracy cast aside for unemployed, exiled for prison, and poor houses for SNAP, subsidized housing, homelessness, food pantries, soup kitchens.

        • NBay says:

          Guess the oligarch family names will suffice until it’s time for Dukes, Earls, Counts, etc, etc?

    • K says:

      I neglected to add: due to underlying inflation and the likely hyperinflation that will take off when the economy recovers, the ultra rich (banksters and Wall Streeters) know that they have to increase their slaves’ pay to keep their loyalty and keep them at work instead of hiding in their homes until the pandemic abates. You need loyal servants while you “sell this country out for a quick dollar” as Mr. Enjeti said in reference to the Wall Streeters.

    • kevin says:

      Its called maximizing efficiency. You lay off say 25% of your workforce (since you now realize you can actually operate with less staff and many can work from home or remotely), reduce office footprint and save another 30% in rental expenses, office printing/telephony/utilities/administrative/office coffee costs etc.; then you increase the remaining staff salaries by 7%.

      You still have a good chunk of savings that can go into Director’s share allocations or share buybacks for the company.
      Yay! everyone’s happy – the Board, shareholders, employees ( except those that got fired).

      Eventually the remaining “grateful” employees will also realize they got the short end of the stick since they now have to work 28 hrs more per week, including weekends. lol.

      • NBay says:

        Someone here once said, “the market clearing price of labor is slavery”.

        Don’t know if that’s even correct econ lingo, but “independent contractor” is even cheaper and easier to deal with. Plantation slaves or even ancient slaves required some amount of up keep….had to make sure they had minimal food and shelter, at least. Now it’s the public’s and the Gov’ts problem.

        A corporation is one of the most evil economic/legal social constructs ever invented….no wonder the founding fathers hated and mistrusted them. Even time limit chartered them for a while, but by Lincoln’s time he said they were “enthroned” and more dangerous than the Southern Army and the gov’t bureaucracy.
        “That all the wealth would be in the hands of a few, who would prey on the prejudices of the people, and the Republic destroyed.” And public corps are vanishing into PE, like El Chapo’s Cartel is.

        Guess we let you down on that Gettysburg request Abe, sorry…..

        • 91B20 1stCav (AUS) says:

          NBay-grifters, large and small, gonna grift. Tears of rage, tears of grief at your last sentence…

          may we all find a better day.

    • Jimmy John says:

      I would guess a larger percentage of the lower paid workers are getting furloughed as a compared to the higher paid employees. Thus the wages are going up on average.

    • Lisa_Hooker says:

      “The criteria is can you work multiple jobs? Can you multitasks more responsibilities? If yes, you get to keep your job. … he worked till 8pm now everyday. He even worked weekend sometimes.” – sounds like my Fortune-50 major telecom mfgr in 2008-9.

      • Lisa_Hooker says:

        FWIW – jobs never recovered. Offshored in 2009-10.

      • NBay says:

        Per Dilbert, a successful business meeting is where you manage to talk more than anyone else, and leave with no new assignments.

    • get it says:

      Someone wrote half the stimulus went into shipping fees. Seems to other half went into Wall Street profits.

  2. Hernando says:

    Less people, less overhead, more money for the the remaining few?

    • David Hall says:

      Wages are rising because there are labor shortages in healthcare, skilled construction trades, truckers, etc. My brother was a teacher. He told me every year the county hires new teachers. He complained the school bus drivers got paid more than teachers. I did not fact check it. Perhaps they were paid by the hour and got fewer hours. This is a low tax state. Class room sizes are larger. The quality of education is poorer.

      • Jon says:

        My friend in CA retired last year at the age of 65 as a high school teacher with pension salary of $110K/year and with all other benefits.
        I think its a good deal.

        • Anthony A. says:

          I think this kind of teachers pension only happens in California.

        • mike says:

          Perfect example of why California is the most expensive and highest taxed state. The payers are leaving the statement in the tens of thousands and the takers are staying. Our whole valley in Nevada is filled with people who have fled California. They are very welcome but hopefully they do not bring their politics with them.

        • Shiloh1 says:

          Chicago metro teachers not far behind.

        • intosh says:


          You have it upside down. The takers are the ones leaving, finally. They created the crazy inflation so that teachers, nurses and public workers, just to name a few, can no longer make ends meet with their normal wage. Higher taxes are the inevitable consequence.

          The takers came to dig for gold, poisoned the well in the process and then complain the water is polluted, so they leave.

        • roddy6667 says:

          There is no way the money to support this kind of pension was ever put into the coffers. In the future, it will collapse.

        • NBay says:

          I will ask my CA retired teacher sister if that is true. I doubt it strongly right now. Maybe your friend was a school administrator?

        • Felix_47 says:

          Over 200,000 for a California fireman like my bro in law.

        • NBay says:

          Mike, is that valley somewhere north of Reno? I know someone who worked (CAD engineer) in a Modesto company that designed and laid out a huge subdivision there. 2012-4 or so. All for custom homes on large lots. But don’t worry, it’s mostly just a tax dodge. They spend most of their time here in their CA home(s) with the good climate, scenery. and friends, family. Also makes ski trips easier.
          Nobody really can keep track (or likely tries) of them spending 6mo+/year in NV, especially since they leave a cheap non-citizen housekeeper there. No neighbors or nearby storekeepers will rat them. And NV insider rich were very glad to sell crap land, get tons of construction work, and the housekeeper jobs….and some taxes are better than nothing.

          Everyone’s probably happy with the arrangement. Even though they do vote in NV, I’m sure they aren’t very liberal, at least on econ stuff.

          Also to Jon, my ret CA teacher sister said the most she ever heard of was an $80K retired HS teacher. But he was in very rich high prop tax school district, and coached after school and taught summer school for many years, getting extra year credits toward ret. Newer teachers don’t get nearly as good a deal. So I call BS on ya.

      • Wisdom Seeker says:

        “…rising prices and wages, despite further deterioration in business” is the classic definition of stagflation.

        I agree with David – the economy is in a stressed state, due to COVID and the policy responses to it. Many businesses are in the toilet but many others are maxed out and short on capable workers.

        On the demand side, same thing – there are some products & services you can’t buy at all right now, others are a lot harder to get, and the available cash is funneled into the remaining items. Those are supply-constrained, so prices rise. And prices for the other stuff don’t count since no one’s buying them.

        CPI-U with its fixed basket can’t grasp this dynamic, so the Fed is out to lunch as usual. And next they’ll tell us that “home improvement” is the hedonic substitute for that “vacation in Hawaii” that’s off the market right now, and inflation is down since stay-home DIY remodeling is cheaper than Waikiki living…

      • roddy6667 says:

        I know I’m old, but in the mid Fifties, average classroom size in CT was over 30. Everybody learned to read and do math. There was one teacher and no assistants or aides. Administration consisted of one principal, one secretary, one part-time school nurse, and 2 or 3 janitors. When you got a high school diploma you were not functionally illiterate. You did not need 2 years of remedial reading and math courses in college as we have today.
        Here in China I was volunteering at the neighborhood grammar school in a small English program that was sponsored by my Chinese friend. It was for recruiting students for his private after school classes. This school is the model for all the new grammar schools in northern China. People are fighting to buy homes in the area to get their kid in. It has 1500 students. Average class is over 30 students. No helpers or assistants. One headmaster, one secretary as administration. The kids enjoy their classes, and are happy, spontaneous, and disciplined. Quality of education is excellent.
        America has fallen far behind the rest of the world in public education.

        • Lisa_Hooker says:

          roddy – you may learned to read and do math, but I’m willing to bet that the kids never learned how to get in touch with their feelings and inner self. Then again, that didn’t work out so well over the last 20-30 years.

        • NBay says:

          I think you are confusing kids with trophy wives. In the Bay Area it’s usually Asian religious techniques, while in Phoenix/Tucson it’s Shamanism. Don’t know about CT.

      • I understand it is difficult work but travelling nurses do pretty well.

    • Mira says:

      When we had no washing machine, the business prospects were brilliant – the washing machine lasted for ever & spare parts were cheap as chips.
      Then the washing machine developed a working life of 10 year & it cost $100’s to call the repairman in.
      Today we all have a washing machine, it has a working life of 5 years & we put it out on hard rubbish collection day & get a new one.

      Everybody has a washing machine .. business done.
      We all have more clothes than we need & we have .. you haven’t looked at it in 10 years .. throw it out days.
      When I was 16 clothes were something you yearned for .. today we are over it .. I am more than the rags I wear.
      We have reached saturation point in almost every indulgence.

      It’s time for us to develop new valued .. ?

      • Mira says:

        I wanna tell a story here.

        John .. a business professional .. took $100 of $2 coins & made $10 piles of them .. he then wrapped stick tape around each $10 pile & took them to his local watering hole .. sat at the bar & ordered a drink .. as the barman delivered his drink John was piling his $10 piles of magic coins onto the bar ..
        “Keep them coming.” he told the bar man.
        The bar man was not sure what to make of this .. but just in case .. he replied ..
        “The first ones on the house.”
        A man at the other end of the bar said ..
        “Next ones on me.” ..
        The guy next to him ..
        “I’ll be in that.”
        Another guy on the other side of them said, “Me too.”

  3. Zantetsu says:

    Sorry, Wisoot’s original comment that I replied to disappeared while I was writing my response, so now it’s completely out of context. Wolf you should probably delete my response and this message too.

  4. KGC says:

    Of course wages are rising. The worker is asking why someone who doesn’t makes more in handouts when he’s busting his ass on a regular basis. And then there’s inflation, which gets a supercharge from “free” money with no accountability.

    Is nobody looking at what’s going to happen 10-15 years from now when this debt is going to come home to roost and the workforce will have grown used to 20% unemployment?

    I see the USA looking like a lot of Europe. The rural areas are going to be begging people to live there because the tax base has gone away and they can’t afford basic services and the cities are going to suck if you’re not able to afford a higher cost of living.

  5. Martha Careful says:

    In regard to the weirdest WTF economy ever, consumer spending concerns are not only justified looking back, but going forward. I do see optimism here and there with rosy outlooks, but in all seriousness, it seems like we still have a dark time ahead.

    I do watch virus news and the latest variant, which is just starting to spread in America, is going to be super challenging. In theory, this pandemic may play out like The Spanish Flu, with year two being far more deadly than year one. It’s also hopeful that this virus will mutate itself to a point where it’s just like a common cold — but, before that happens, it may have the ability to mutate in a very dangerous way, being able to outrun any vaccine available.

    Here’s the latest dope, and it isn’t at all related to a booming economy this summer.

    ==> Recurrent emergence and transmission of a SARS-CoV-2 Spike deletion H69/V70


    Permissive mutations such as ΔH69/V70 have the potential to enhance the ability of SARS-CoV-2 to generate new variants, including vaccine escape variants, that would have otherwise significantly reduced viral infectivity.

    Over the millions of replication rounds per day in a SARS-CoV-2 infection even modest reductions in antibody susceptibility could be significant. Therefore, ΔH69/V70 may be a ‘permissive’ mutation that enhances infection28, with the potential to enhance the ability of SARS-CoV-2 to tolerate mutations, which could include immune/ vaccine escape variants that would have otherwise significantly reduced viral fitness. We show here experimentally that the ΔH69/V70 deletion is indeed able to rescue an infectivity defect induced by N501Y.

    • Heinz says:

      Jury is out on whether the two major SARS-Cov-2 variants circulating are worrisome to human immune system defenses.

      Viruses are constantly mutating, whether flu or any other.

      As long as spike protein mutations are limited in number people that have already been infected or vaccinated should have enough various antibodies on board that would recognize other bits and pieces of the virus and inactivate it effectively.

      Our cellular immune response like T-Cells can also take out pathogenic viruses that escape antibody defenses. These long-lived memory cells are our best bet for lasting immunity.

      • Paulo says:

        Good comments Martha and Heinz,

        I was watching an interview with Dr Osterholm the other day and he used a baseball game as metaphor. “We are in the bottom of the 4th or top of the 5th”. He also said that by the middle of February there will be 500K dead in US. The Spanish Flu, which you referenced in your comment, saw 675K US citizens die. Unless people start wearing masks and stay home there could well be 800K + dead before the vaccines begin to take hold. If they don’t work, better pray for benign mutations.

        What has struck me is how many great musicians and songwriters have died this year from Covid.

        This economy will never fully recover until the virus is done with us.

        But here is a good news story. I have this ’81 VW Westfalia that I keep in very good shape. I try to do much of the work myself, but there are some mysteries that are above my abilities. Plus, I do not own a hoist. This year I said “eff it”, I’m getting a bunch of stuff replaced and I’m not lying on the cold concrete with my torn up shoulder anymore. I made up a list of repairs and preventative maintenance issues and took the Westie to a specialist I know 1.5 hours away. Yesterday. I could hardly get into the parking lot. The lot was lined with Westfalias. 10 months ago he thought he might not survive. Yesterday he said, “It’s a nice problem to have”. His crew is going flat out!!

        I think what it is with ‘us customers’ is optimism. In my case I told my wife that getting reading for our little road trips and visits is just something positive in this terrible year. I figure another 8 months for us in BC.

        • Happy1 says:

          Paulo, the population of the US in 1918 was 104 million, less than a third of today’s population, Covid-19 deaths will need to quadruple for this pandemic to be the equal of 1918.

          And this pandemic is disproportionately killing people over age 70, in my state, CO, 70% of fatalities have been in that age category. 1918 killed vastly more young people.

          Not saying this pandemic isn’t bad but a little perspective should be applied when compared to 1918.

        • Martha Careful says:


          The new variant spread can easily be seen in the UK and Germany, as examples. If it does have the near-term ability to mutate, things will become far uglier. I read this morning that Israel doesn’t believe that the current vaccine effort is working as well as the manufacturer claimed. They also have the world’s most aggressive vaccination plan!

          This week’s national ensemble predicts that 1,300,000 to 2,400,000 new (US) cases will likely be reported in the week ending February 6, 2021.

          I enjoyed your story and obviously there will be a lot of pent up demand going forward, offset by virus challenges

    • Lisa_Hooker says:

      Folks, the virus is doing the best it can to survive. It’s simply “rolling with the changes.” The weak die off, the strong multiply. And sometimes it just changes for the heck of it. Unfortunately, “same as it ever was.”

    • NBay says:

      Thats a meaningless molecular biology pile of “dope” if I ever saw one, even if you do have a “delta” on your keyboard.
      Give me the NIH Pub Med HTTP address please, I want to read this article for myself.

      • NBay says:

        And if it’s not in NIH Pub Med for worldwide peer review, so I can check out citations, authors, conflicts, etc, then I don’t want to see it. I could care less about Genentech, Pfizer, etc, in house stuff.

        They have corrupted Bio research bad enough as it is.

        When I make comments like that I just post a functional link.

        • NBay says:

          Well Martha? No link? No FACTS?

          Nothing left to do but assume you “follow virus news” like I read Popular Science as a kid, and I even gave you the benefit of the doubt that you may be involved in Bio somehow.

  6. Engin-ear says:

    – “But wages are rising, despite declining employment”

    Let me guess.

    Lower activity = workforce layoffs.

    Start with who? With low wage segment of workers, presumably the least valuable for companies (yet I have a firm suspicion that the best value for wage is specifically in this segment of work).

    The bottom segment being laid off, the remaining segments show increased median and average wage.

    And to secure some core skills, some workers may have +10% increase in wage for +30% in work volume.

    Similar play with prices.

    • Wolf Richter says:


      They’re not talking about total payroll paid, divided by the number of people — which is what your measure does. They talking about specific wages, the wage scale, the raises they give, how much they have to pay to attract talent, the increase in their entry-level wage, etc.

      • Paulo says:

        I always have a kind of cynical whisper in the back of my ears when I read these reports. Not about the graphs, as they are data based. But when I read, “Managers report that”….. I am suspicious.

        Many years ago I was hired by a company that said they were tired of turnover. They somehow heard from a friend of a friend I was near the end of a contract, contacted me and said, “Money is no object, when can you get here and can you fly a Dornier”? I worked there 2 months before I quit having found something better. Apparently money was an issue, after all. They probably still think they paid well and it was a good place to work.

        Show me the pay stubs. :-) Hmmm wasn’t that line in a movie somewhere?

        And if wages truly rise, then so will interest rates to take it all away….just to save the economy, after all.

      • Lisa_Hooker says:

        Wolf, numbers could be skewed if hires now have a masters degree for same job. No mention if new hires for more pay are more qualified. If I’m paying $40k why not hire an out of work masters or even a PhD and just thank the remainder for their resume.

  7. MonkeyBusiness says:

    The gig companies probably gained a ton of new workers.

  8. A says:

    All aboard the inflation train. Choo! Choo!

    8% inflation by the end of 2021?

    • MonkeyBusiness says:

      Not according to the Fed. They can’t see it no matter how many PhDs they have on staff.

      It is difficult to get a man to understand something when his salary depends upon his not understanding it.

      — Upton Sinclair.

      • MonkeyBusiness says:

        Officials responsible for briefing Ms. Yellen said she is prepared to say, “The value of the U.S. dollar and other currencies should be determined by markets. Markets adjust to reflect variations in economic performance and generally facilitate adjustments in the global economy.”

        “The United States doesn’t seek a weaker currency to gain competitive advantage,” she is prepared to say, according to the officials. “We should oppose attempts by other countries to do so.”

        We should be fine!!!

        • MonkeyBusiness says:

          QE, low interest rates, etc had no effect on the dollar. No sir, no madam. “It’s the market!!!” “Even if we increase interest rate to 5%, the dollar will still drop!!!”

      • Yeah, the Fed and the Federal Government have a vested interest in not reporting real world inflation: annual COLA adjustments for this grey-haired sea of retirees out there (including ME) and the necessity to not spook the herd into buying early to avoid price increases later. Moving demand to the present and starving the future.


        In post-WWI Weimar Germany, the beleaguered citizens would spend every Reichsmark they got in the morning before the sun set in the evening, buying stuff that would go up in value the next day. American freezers and pantries are bulging currently, mainly because of supply chain disruptions in early 2020, BUT THE PRICE INCREASES ON THESE SAME FOOD STUFFS IS CHUGGING DOWN THE PIPELINE TO A CHECK-OUT AISLE NEAR YOU AND ME.

        Watch the grocery aisle prices with a keen eye. Food inflation is an historic indicator that the Inflation Camel has his nose under the tent. The U.S. Camel is half-way INTO THE TENT.

        • Swamp Creature says:

          Yep, Noticed the grocery stores are resorting to all kinds of tricks to disguise the price increases. Even though I buy the same 15 items every time they constantly change the look and the packaging. Makes it hard to tract the real price changes. Constantly changing , weight and amount of items supplies especially in the non-food items. Marmalaide imported from France just jumped by 45% for the same quantity. Use to be able to get 2 for $5, now $5.89 for one.

        • Petunia says:

          I’ve been talking about food inflation for the last 5 years. My food bill doubled in those 5 years. Is it news now because of all the unemployment and homelessness, because I can’t believe nobody noticed until now.

        • Lisa_Hooker says:

          Simple solution – exclude from the CPI basket items that have gone up in price.

      • NBay says:

        Good Sinclair quote….a major part of the Pooh-Poohing of climate change and a Green New Industry (Deal).

    • Jack says:

      I do not think there is inflation besides the effect from shorting the Dollar to all time records to keep stock bubble inflated by speculators, remember the Dollar is down 15% or so & inflation runs at a fraction of that, as the Dollar bounces back from a short squeeze the CPI will go negative, even if there was inflation & I know people do see it & feel it at this moment, it’s not the inflation that will last, wheat, corn, nickel, copper, oil are all speculative bubble, then ad the Dollar, so sure people see price rises, this will not last in this deflationary environment, speculation is the highest in history. The inflation that is worrying is that that last, that has real lasting power, from higher wages, when people are broke & prices in a bubble then it’s transitory.

      • MonkeyBusiness says:

        So if the Fed increases interest rate to 5%, the dollar won’t rally and inflation won’t drop? How quickly people forget the 1980s.

        • makruger says:

          At a 5% interest rate we’re probably looking at a DOW correction down to the neighborhood of 10K or so, maybe even lower.

        • MonkeyBusiness says:

          Yeah, but inflation will head south. That’s my point.

  9. Jack says:

    Are wages rising (Av Wage), I think it’s a myth, if you strip out all the low paid workers due to massive job losses, restaurants, leisure, hotels etc, you end up with av wages rising, it’s just a distortion of the figures, when high paid employees retain their jobs at a far higher rate as is now the av wage will rise. I do not believe for one second wages are rising, no employee would raise wages in this environment, employees have to many workers to choose from to raise wages, simple maths, if you strip out all the low wages & retain high earners the figure rises. So looking at all the data you present it fits perfect when you consider wages are not rising and massive earning destruction is taking place, then consider the distortions of stimulus checks, supplements to unemployment, not paying rents, mortgages, loans, it’s not so weird then, it will however end up in disaster very soon, you can only pretend & manipulate for a shot time before reality comes back with a BANG.

    • Wolf Richter says:


      The services sector has some of the highest-paid employees. These are big companies, such as banks, insurers, healthcare providers, information services companies, tech companies, etc.

      Don’t confuse “service sector” with “bar tenders.”

      By way of background, and not related to this discussion here, the chart below shows personal income from wages, across the US all sectors, including the sectors that got totally crushed, such as airlines, restaurants, etc. This is in trillion dollars annual rate, not in hourly wages:

      • Jack says:

        That’s a great graph, how do you square this then, wouldn’t stimulus like unemployment effect it? It seems to have bounced back to it’s previous high, wasn’t the stimulus of $600 a week on top of unemployment a massive boost to artificially blow this up?? This seems and impossibility without stimulus.

      • Jack says:

        So this bounced from $8.6 trillion to $9.6 trillion straight back, stimulus checks, $600 a week & PPP to pay for wages, they pumped it up easy in excess of 1 trillion, to me this is just manipulation that can’t last, it’s not organic & it’s all debt, the accumulation of debt kills the economy even more as the gov sucks up the dollars. That’s the problem see wolf, this sit down do the maths and manipulate, how much do we have to pump in & how to make the numbers look back to normal, I realise some jobs pay well, what I was saying is the av wage rising isn’t proof of a bounce back, you graph however explains what you were referring to and rightly income have returned to normal levels, even if it is a scam by politicians.

        • Jack, the Utility of $1 of new debt has been declining for years as to how many cents (35 cents now?) you get in incremental GDP growth as a result. Eventually, the $1 of new debt created by Washington and the Fed will actually produce NEGATIVE GDP GROWTH (an oxymoron if there ever was one!!!).

      • Jack says:

        So what is you verdict then Wolf, cuz I don’t believe I word they say, I really do not, one explanation might be the CEO doubling their wages, or the 0.01% raking in massive income gains, bonuses, I’m sure it can be explained, it doesn’t replace though the income that is spread out & spent in the economy, this whole house of cards will collapse soon, thanks for the graphs, fantastic.

        • Jack says:

          Oh I forgot to add, I read an article stating massive 401k withdraws, cares act allowed this without penalty, that’s income, anyway thanks, I do believe one time factors are massively distorting statistics, intentionally I might add.

        • Wolf Richter says:


          FYI, withdrawal of any kind from a 401k is NOT income. You’re taking money out of one account that you own and putting it into another account that you own. And then you might spend this money, but that’s like spending money you have in a savings account.

        • VintageVNvet says:

          As Wolf has introduced to us with this article,,,
          “Succinctly” put and after watching these kinds of press releases by the Fed and all the Federal agencies, I TOTALLY agree:
          Not one general concept is at all believable these days, and very likely not one of the individual data points in any of the press releases from these folks is either.
          Liars from start to finish, and even though I do not believe that most of the individuals involved (in these guv mint and other agencies) really intend to do the harm they do to We the Peedons,,, that is exactly what they do every day with their lies, damn lies, and statistics.
          How to get out of that mode is and will be the challenge for the next couple of decades, while these folks and their clear enablers continue to screw us working folks, no matter how much savings, paid off housing, etc., we might have accumulated up to now.
          I just hope and pray this situation will NOT come to the usual final conclusion as has been demonstrated SO many times over the last couple of thousand years before the masses take to the streets and clear out all the demons sucking the blood out of the working folks.

        • Petunia says:


          401K withdrawals are income, but they are not wages. You still pay taxes on it as regular income.

        • Wolf Richter says:

          Now you’re twisting this into a tax discussion. On your W-2 sheet, to the right, there is the Earnings Summary. The first line is “Gross Pay.” That’s the amount of money you earned from your labor (wages). Then there are the deductions, such as HSA, 401k, cafeteria plan, etc., which are deducted from your gross pay. And then, there is the bottom line, “Reported W-2 Wages.” That’s how the tax code works. For tax purposes, you’re deferring the income, and you’re deferring income taxes on that income, until someday you may have to pay those taxes. With some things, you never have to pay those taxes, such as with an HSA deduction, even though the money sits in your account and you can spend it on healthcare expenses however you see fit, or not spend it.

        • Petunia says:


          I hate to split hairs about the 401K, but our tax system is all about splitting hairs. I think you consider the 401K deduction from wages a withdrawal, and it is not. A 401K deduction is what they subtract from gross pay and a withdrawal is what you take out of the funded 401K account. This is not a minor point.

          The scenario you described is a 401K deduction, a tax deferral on income. A withdrawal from a 401K account is a draw which increases your income.

          To me, your chart only reflects gross wages. It does not represent all the 401K money being withdrawn, from funded accounts, and taxed for the period.

        • Wolf Richter says:


          I know that, and I’m not sure what made you think you needed to explain this. Maybe my comment was written sloppily… it was kind of late for me.

          I was explaining what “gross pay” is (before deductions from 401k, HSA, etc.) — because gross pay from the employer was the point of the whole discussion triggered by Jack’s statement that this wage data as posted in the charts above was inflated by 401k withdrawals.

          My point was that the wage data in the charts I posted in the comments above is not inflated by 401k withdrawals because the wage data is based on gross pay from the employer BEFORE deductions, and that gross pay from the employer is what is being tracked for wage statistics, not take-home pay, and not “total income” on your tax return, and not “adjusted gross income” on the tax return, and not “taxable income” on the tax return.

          I don’t even know why I got suckered into this whole argument triggered by Jack. Extra 401k withdrawals during the Pandemic — beyond what is normal — were minuscule, compared to the overall wage data and aren’t even a rounding error in the overall wage data. Just out today:

      • RightNYer says:

        I just don’t see how this makes sense. If unemployment is still double what it was, how could total wages be fully recovered? Even if those 3.5% who are still unemployed above whom were unemployed in February were making minimum wage, the numbers still don’t work…

        • Petunia says:

          The numbers work if the already employed are getting raises and bonuses. You are seeing the rich getting richer.

        • Wolf Richter says:

          The people who got laid off were mostly low-wage workers. High-wage workers switched to work from home. Some industries in the service sector with high wages are RED HOT. The Pandemic is the best thing that ever happened to them. Been documenting it for months.

        • RightNYer says:

          Wolf, that actually raises the question as to what exactly our “leaders” are doing with the “stimulus.” It seems as though the stimulus really isn’t needed outside of maybe 5% of the population.

          Do they know this and not care, or are they attempting something nefarious?

        • To wrap our heads around this: The wage spike is spurious, a soft labor market will erase those wage gain numbers and personal income will revert to the mean?? The real measure of inflation is credit, and we aren’t seeing any tightness there are we? The ten year is dropping and mortgage lenders are advertising low rates, but it is cash buyers who have the market??

        • ElbowWilham says:

          This is totally anecdotal from my little corner of the world but…
          I own a small IT company. We were pretty much on hold from adding new customers for half of 2020. We were just servicing our existing customers. This actually caused my profits to go up, because I was not buying any new equipment, our vehicles were not running as much, etc. I also have a profit sharing program with my employees.

          So we all got a little extra profit this year, but we had zero growth for the year. Not sure if this was repeated 1000s of times throughout the economy?

      • Lynn says:

        I certainly confused “service sector” with “bar tenders.” Now that makes more sense. Of course.

      • MCH says:


        Does the service sector in this instance actually include the baristas at Starbucks, the bus drivers, the guys working at restaurants? I agree that certain parts of the sector is well compensated, but proportionally, how many workers are we talking about here, and if one had to plot a distribution of annualized wage, what kind of a curve would you expect?

        • Wolf Richter says:

          We don’t know what companies are included here. We know they’re large employers, not mom-and-pop operations. So if there is a huge cafe chain headquartered in the NY Fed’s district, maybe. But I don’t know of one.

          Also some of those people you just named got a living wage increase.

        • MCH says:

          Well, if you’re talking about the stimulus and the enhanced unemployment, there is no arguing that.

          I’m real curious to see how far $15 Federal minimum wage gets. Cause that’s going to cause an uproar in more than a few places. Not the coasts or the major cities, since most are already on the way there.

        • Lisa_Hooker says:

          @MCH – This will work out. Fire the employees not worth $15/hr and tell the remainder to pick up the slack if they want to keep their job. Economy by government decree doesn’t work out well. See Nixon wage/price controls in the 70’s.

        • MCH says:

          @ Lisa Hooker

          Ah I like it, the sound of efficiency and productivity.

          One should study increasing wage to $20 an hour and repeating the same process. All the way up until the point where an AI or a robot could replace the worker entirely.

          Then we can keep moving up the chain of management, until there is only the CEO left, and he is served by an army of self repairing robots and AI.

          But for that to work out really well, we need the government to ensure Basic Universal Income, or as the future mayor of NYC like to call it: “Freedom Dividend.” That way the CEO can be paid his fair share

  10. Nathan Dumbrowski says:

    Don’t fight the FED. I keep repeating that slowly to myself. They are going to force and give forgivable loans to everybody who puts out their hand. No loan left behind. Mind you they are in the guise of SBA loans but they forgivable or insanely low interest rates guaranteed by the GOV’T if you don’t meet the qualifications to have it written off. This is how the money printers work

    • Nathan, but Debt Forgiveness, in whatever form it takes, makes the American Borrower a Banana Republic credit risk. Lending to Americans via purchases of U.S. Treasuries by foreign nationals will decrease demand for Dollars to do so as they increasingly pass on Stinky U.S. Obligations, and U.S. rates will have upward pressure the Omnipotent Fed (??) will not be able to suppress as 2021 progresses. Credit risk is the governor that the Fed fails to fully appreciate in its one-size-fits-all approach to Monetary Policy.

      • Heinz says:

        These conceited fools running things have all drunk the Kool-Aid about MMT and believe they truly have (for the first time in human history) found the elusive secret to prosperity by simply conjuring ‘money’ out of thin air.

        When dust settles on this sordid affair, an impoverished nation will wonder where that free lunch went.

        • RightNYer says:

          Yes, MMT is like taking shots of liquor. The benefits appear right away, but the negatives don’t appear until later, after it’s too late to do anything about it.

    • Lisa_Hooker says:

      Nathan, I would proffer a better suggestion: Don’t fight the very, very rich people.

  11. Robert says:

    “and these companies are still shedding employees but now faster than in prior months, and yet wages and prices are rising.”

    New York City is now at a $15 minimum wage as far as I know. Upstate New York at $12.50.

    It could be that companies are shedding workers to pay the remaining workers higher wages. Although it might not be so simple a dynamic. It’s possible they are shedding workers to meet declining demand AND they need to raise wages to meet the expected wage increases required by the state.

    Also could be that companies are firing older workers who have a higher chance of contracting COVID, and paying their younger workers more.

    • Sam says:

      From Portland to Rochester…..
      Was having unemployment premiums scheduled to level up 10x the final straw? Doesn’t really matter anymore?

    • Petunia says:

      Conspiracy Theory:

      Maybe they are raising wages because the more workers earn, the higher the taxes they collect from them.

      Cynical, I know.

  12. Seneca's Cliff says:

    We can understand this by going back to the Robinson Crusoe analogy. When the ship crashes on the huge uninhabited island the first trades which appear are the primary creators of economic value. Farmers, toolmakers, fishermen, hunters, hut builders etc. Then eventually, as a surplus is created, along come the insurance providers, the bankers (to store coconuts for a fee ) etc. But once times get harder ( drought, pandemic etc) the surplus declines and the service providers must be winnowed out. The stronger ones cast the weaker ones in to the sea so they can keep their positions storing coconuts or selling insurance, and maybe even skim off a bit more of the surplus for themselves if they cast a couple more of the weak providers in to the sea. Eventually the farmers and tool makers realize they can store their own coconuts so they cast the rest of the service industry folks in to the sea.

    • Lisa_Hooker says:

      Moral: stay in shape and take swimming classes.

    • Jeremy Wolff says:

      I’ve always felt service industry was dead weight.

      Great to have when times are good.

      Need to eliminate in tough times.

      There needs to be a sufficient enough scale of work to outsource service. You higher an account if you can’t do it yourself (or the price justifies the added value).

      When your sales are slow, there are certain services that were outsourced that you can manage in house. As some people said, the owner of the business steps in and does instead of using labor.

    • NBay says:

      Yeah, but before times got hard, the bankers stored enough coconuts to buy the whole damn island, and hired cops to protect their property.

  13. WES says:

    Saying wages are going up beggars belief!

    Those who still have jobs were told no annual increases in 2020 so they are working at 2019 wages.

    Something smells, and it isn’t higher wages!

  14. WES says:

    So far the Fed isn’t desperate enough yet to let “nominal” US interest rates fall to zero or go negative. But they are certainly getting more desperate!

    I suspect the Fed doesn’t want to flip the contango commodity markets into backwardation, amoung other issues!

    The problem is the US dollar being the world’s reserve currency and commodities being priced internationally in US dollars.

    If US interest rates were to go “nominally” negative, like Europe and Japan, commodity traders would start dumping US dollars to buy commodities! They would also dump US bonds too!

    That doesn’t mean the Fed and the US gov don’t want negative interest rates, to debase debt! They certainly do! They can not be open about it, so have choosen to be sneaky instead! That is where we are presently, with about negative 1% real interest rates!

    They are skating as close to the edge as they dare, for the time being!

    However, they are not satisfied with the current rate of debt debasement! The negative compounding is simply too slow! That is why they want higher inflation!

    They want real interest rates to become more negative! This will greatly increase the negative compounding that they need to debase the debt!

    Remember the rule of 72!

    The Feds are hoping to get away with keeping their nominal interest rates between 0.15% to 0.25%, while hoping nobody notices that real interest rates are going more negative!

    The Feds are planning on skating even closer to the edge than they already are now! They are desperately trying to push the edge out even further!

    Someday, the ice will crack!

    • Jon says:

      It’s gonna be interesting.
      US Govt wants more money for all the programs and would need to sell treasury bonds. But who is going to buy the bonds at such low yield. No one but FED. If FED buys then DLR would go down as it has gone down 15-17% in last 9 month or so.
      If FED debase the currency, then i think all things would become more expensive

    • YuShan says:

      I think most people overestimate the effect of inflation on real debt in current conditions. Real yields of -1% or -2% are by itself not making a big dent in the debt, especially not when you keep running big deficits.

      Actually, I think that the Fed communicating that they will let inflation run hot could backfire, because when inflation finally creeps into the CPI the bond market is going to anticipate inflation going to run out of control before it actually happens, potentially resulting in higher real yields.

      Suppose you would get 5% inflation for 3 years, long dated bonds are then likely to yield 5% or more. If the Fed tries to buy them all up to suppress yields, that would mean even more money printing, further reinforcing the inflation expectations that were causing the yield rise in the first place.

      So if you have 5% inflation for 3 years, you reduce real debt by 15% but the yield at which companies and gov have to refinance their debt would double or triple, requiring lots of cash for debt service. Actual cashflow needed for interest payments would explode before debt is significantly hollowed out by inflation. That is the end of zombies and semi-zombies and it would add to gov deficit too.

      You often read about how the massive debt after WW2 was “inflated away”. But that situation is not comparable with the current situation. The US government was then running a very low budget deficit and even surplus at the time and on average GDP growth was solid, demographics favourable. Also, at the time there weren’t massive unfunded liabilities (pensions, medicaid, etc) coming due within a few years. In other words, the growing out of the debt scenario was believable at the time. Now it isn’t.

      • Old School says:

        It’s above my pay grade, but Hussman has a chart that shows if short term rates were to slowly rise to 3% over 30 years then t-bills would outperform stocks and treasury bonds.

        That may be where we are that Fed government has facilitated to much debt and interest rate repression will just grind savers into the ground because anything else blows up the financial markets.

        • YuShan says:

          It’s clear what the central banks want, but that doesn’t mean that they can pull it off. Ask Argentina.

        • RightNYer says:

          Wouldn’t rates slowly rising at that point actually benefit savers?

  15. X-Pat DE says:

    I work in the services sector. Banking/IT.
    The (big) company’s plan is to remove all contractors (of whom I am one) by summer and some people have already been terminated.
    I’ve heard this song a couple of times. It invariably ends with some system breaking and needing urgent repair and the contractors are back in double-quick.
    But maybe this time is different.
    Personally I’m lucky enough to not “need” the work and last year was spent writing a new (COVID reporting) system with no holiday, so I could do with a break.
    But if the banks, where they literally create money, are “feeling the pinch” you can imagine what other corporates are feeling.
    Anecdotally. I didn’t have a pay rise for 10 years. I managed to squeeze 2% last year.
    And yes, food price inflation here in Germany has been on the rise for several years, often disguised as shrinkflation (smaller packaging/less content).

  16. jerry d WOOD says:

    What it all comes down to is ‘take your best guess as to what the future holds’ or am I the only one that cannot figure out where to put my money?

  17. Anderson Phillips says:

    This talk about wages is missing the barn door by a mile; one third of the US population that’s 117 million people have not had an increase in wages since 1973….think about that…I bought a brand new Mustang in 1972 for 3k…what do they cost today. Don’t like these numbers try this one… 8 billionaires….all the tech Emperors plus Buffet own as much wealth as the bottom half of the world. That’s 8.0 verses 3,600,000,000…people not numbers… to place this in context: the USA produces about 5.5 million tons of apples a year, at 6667 apples per ton this equals about 3.7 billion apples… 8 apples verses the entire harvest of apples…it’s simply evil….think of this the next time you buy apples….the rich are impoverishing the world…amazing.. ( source- Winners Take All by Anand Gridharadas)

    • NBay says:

      Yeah. We are long past wage changes solving much at all, and it’s time to look at these sick net worth numbers. Imagine the 0.1% here (around $23M net worth last I looked) or that 80K here with $50M and way up, have as much control over what happens In the US as Putin and his oligarchs, or the CCCP have in their countries.
      And those numbers don’t even count all the hidden wealth, as I used Credit Suisse High Net Worth Data report…which I couldn’t find charts for this year….maybe it’s behind a paywall somewhere.

  18. Mira says:

    You rang Master !!

    • Mira says:

      About John .. where the coins magic ??

      We are all wondering .. all the time.
      What if John was wondering about things & wanted answers.
      and ….
      the Universe answered him ??

      John went a little mad .. $200 of $2 coins what a strange thing to do.
      Was John ZAPPED by his Fairy God Mother ??
      Maybe the devil did him.
      Maybe the Universe figured that he deserved an answer & a release from his boredom .. a walk on the wild side !!

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