Bloomberg News

Factory Shift Fails to Lift U.S. Worker Wages

May 11, 2012

Factory workers are getting no richer as General Electric Co. (GE:US) and other U.S. companies move production back home, according to Pierre Lapointe, Brockhouse & Cooper Inc.’s global macro strategist.

As the CHART OF THE DAY illustrates, average weekly earnings of production employees fell 2.6 percent during the past 16 months after accounting for inflation. The decline took place because consumer prices increased more than wages, which rose 1.3 percent during the period.

The chart shows the average nominal and real earnings, or wages before and after inflation, based on data compiled by the Labor Department. Periods defined as recessions by the National Bureau of Economic Research appear in red.

“We are not seeing any pressure on wages,” Lapointe wrote two days ago in a report with colleagues Alex Bellefleur and Frances Donald. This means the economy will suffer as the workers refrain from spending more, the report said.

Manufacturers have been able to hold down pay because so many U.S. factory workers lost jobs during the past few years, according to Lapointe, who is based in Montreal. The number of production employees was 15 percent lower last month than in December 2007, when the latest recession began, according to Labor Department figures.

GE is returning appliance jobs to the U.S. from China and Mexico, as Chief Executive Officer Jeffrey Immelt pledged to do in September. The Fairfield, Connecticut-based company is in the process of spending $432 million and adding 500 positions to design and make more energy-efficient refrigerators.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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