Growing Average Hourly Earnings lead increases in Real Personal Consumption Expenditures - A Closer Look

My fundamental equation is jobs created multiplied times average hourly earnings equals the the most significant contribution to increase GDP growth.

To improve GDP growth increase the number of jobs, average hourly earnings or both. New long term jobs have a sustained impact, average hourly earnings increases much less so.

Usually, growing average hourly earnings leads growing real PCE.

Usually, improving real PCE observed from the same period last year above my 2.5% rule of thumb spurs demand thence jobs.

Not in this recovery.

In the GR Recovery, average hourly earnings began to grow in October 2012 but job creation at round 1.9% from the same period last year has been flat (moving sideways) since January 2012.

Conclusion: Average hourly earnings up a bit, job growth positive but flat so modest real PCE growth.

In 2014 GDP growth will not accelerate, rather it will remain modest.

Note: This chart is updated as new data is available.

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