Real Earnings technical note
Explanatory Note
The earnings series presented in this release
are derived from the Bureau of Labor Statistics’
Current Employment Statistics (CES) survey, a
monthly establishment survey of employment,
payroll, and hours. The deflators used for constant-
dollar earnings series presented in this release come
from the Consumer Price Indexes Programs. The
Consumer Price Index for All Urban Consumers (CPI-
U) is used to deflate the all employees series, while the
Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W) is used to deflate the
production employees series.
Seasonally adjusted data are used for
estimates of percent change from the same month a
year ago for current and constant average hourly and
weekly earnings. Special techniques are applied to the
CES hours and earnings data in the seasonal
adjustment process to mitigate the effect of certain
calendar-related fluctuations. Thus, over-the-year
changes of these hours and earnings are best measured
using seasonally adjusted series. A discussion of the
calendar-related fluctuations in the hours and earnings
data and the special techniques to remove them is
available in the February 2004 issue of Employment
and Earnings or on the Internet under ‘Technical
Notes’ (http://www.bls.gov/ces/).
Earnings series from the monthly
establishment series are estimated arithmetic averages
(means) of the hourly and weekly earnings of all jobs
in the private nonfarm sector of the economy, as well
as of all production and nonsupervisory jobs in the
private nonfarm sector of the economy. Average
hourly earnings estimates are derived by dividing the
estimated industry payroll by the corresponding paid
hours. Average weekly hours estimates are similarly
derived by dividing estimated aggregate hours by the
corresponding number of jobs. Average weekly
earnings estimates are derived by multiplying the
average hourly earnings and the average weekly hours
estimates. This is equivalent to dividing the estimated
payroll by the corresponding number of jobs The
weekly and hourly earnings estimates for aggregate
industries, such as the major industry sector and the
total private sector averages printed in this release, are
derived by summing the corresponding payroll, hours,
and employment estimates of the component
industries. As a result, each industry receives a
"weight" in the published averages that corresponds to
its current level of activity (employment or total
hours). This further implies that fluctuations and
varying trends in employment in high-wage versus low-
wage industries as well as wage rate changes influence
the earnings averages.
There are several characteristics of the series
presented in this release that limit their suitability for
some types of economic analyses. (1) The
denominator for the all employee weekly earnings
series is the number of private nonfarm jobs.
Similarly, the denominator of the production
employee weekly earnings series is the number of
private nonfarm production and nonsupervisory
employee jobs. This number includes full-time and
part-time jobs as well as the jobs held by multiple
jobholders in the private nonfarm sector. These
factors tend to result in weekly earnings averages
significantly lower than the corresponding numbers for
full-time jobs. (2) Annual earnings averages can differ
significantly from the result obtained by multiplying
average weekly earnings times 52 weeks. The
difference may be due to factors such as turnovers
and layoffs. (3) The series are the average earnings of
all employees or all production and nonsupervisory
jobs, not the earnings average of "typical" jobs or jobs
held by "typical" workers. Specifically, there are no
adjustments for occupational, age, or schooling
variations or for household type or location. Many
studies have established the significance of these
factors and that their impact varies over time.
Seasonally adjusted data are preferred by
some users for analyzing general earnings trends in the
economy since they eliminate the effect of changes
that normally occur at the same time and in about the
same magnitude each year and, therefore, reveal the
underlying trends and cyclical movements. Changes
in average earnings may be due to seasonal changes in
the proportion of workers in high-wage and low-wage
industries or occupations or to seasonal changes in the
amount of overtime work, and so on.
For more information, see Thomas Gavett,
"Measures of Change in Real Wages and Earnings,"
Monthly Labor Review, February 1972.
Information in this release will be made
available to sensory impaired individuals upon
request. Voice phone: 202-691-5200; TDD Message
Referral Phone Number: 1-800-877-8339.
Last Modified Date: January 16, 2013