US pay raises hit record low. So the good news is?


Here's a quirk that suits these uncertain times:

So far this year, American workers have received the smallest pay raises since the government began tracking the data in 1981, the Labor Department reported Thursday. It was skimpier than in the 1980s recession. Ditto for the '90s slump.

But factor in inflation and look over 12 months instead of three. Then that raise ranks, along with the previous quarter's, as the biggest increase since 1983.

The culprit

So what's behind the presto chango? Deflation.

For the first time since 1955, the consumer price index turned negative in March measured over a 12-month period. So what seemed like a paltry rise in pay suddenly looks a lot better as the price of goods and services goes down.

Pay per hour in the first quarter of this year rose 0.3 percent over the previous quarter, as did total compensation, which includes benefits. Those are record lows, said Wayne Shelly, an economist at the Bureau of Labor Statistics. "We've never had that before."

A 2.6 percent surge

But the rare bout of deflation turned an ordinary year-over-year jump into a 2.6 percent surge in pay, the biggest in 26 years.

Deflation over the long haul isn't a good thing, many economists warn. In the short term, though, it's allowing those who are still earning dollars to stretch them further.

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