Wages and Profits The Atlanta Fed’s Wage Growth Tracker is a measure of the nominal (unadjusted for inflation) wage growth of individuals. The graph below shows the 3-month moving average of median wage growth since 1998. Reflecting the strong labor market, wage growth increased significantly in late 2021 and 2022. Wage growth was 4.2% in September 2021, the highest growth since 2008. In 2022, wage growth peaked at 6.7%, declining slightly in October to 6.3%. Wage growth was higher between February 2022 and October 2022 than at any other time during the century. Although wage growth was at its highest point of the century, it still lagged inflation. as prices increased more than wages.
Wage Growth Tracker 3-Month Moving Average of Median Wage Growth, Hourly Data
Sources: Federal Reserve Bank of Atlanta, Bureau of Labor Statistics, Current Population Survey
Although the purchasing power of individuals and families has been declining, corporate profit margins have generally remained strong during the inflationary period, indicating that cost increases have largely been passed on to consumers. According to FactSet , the net profit margin for the S&P 500 for the third quarter 2022 was 12.0%. Although profit margins have recently been declining, the third quarter of 2022 marks the seventh consecutive quarter in which the net profit margin was 12% or greater. Prior to 2021, the net profit margin had hit 12% in only one other quarter in the previous 10 years. The 5-year average for the net profit margin is 11.3%. Another measure of U.S. corporate profit margins tracked by the Federal Reserve has recently been at levels not seen since the early 1950s, indicating that the prices charged by businesses have exceeded their increased costs for production and labor. The graph below shows After-tax profits as a share of gross value added for non-financial corporations, a measure of aggregate profit margins. In both 2021 and 2022, aggregate profit margins approached 15% or higher, the highest level since the early 1950s.
Central Wisconsin Report - Fall 2022
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