Average Earnings

The release

How it is measured.

Most are an average in the plain sense: the total paid, from a survey of employers’ payrolls, divided by the hours worked or the number of employees. The United Kingdom publishes pay with and without bonuses, averaged over three months. The United States also publishes a quarterly Employment Cost Index, which holds the mix of jobs fixed.

Why markets watch it.

Pay is the largest cost for most businesses and the main income of most households, so it bears on both inflation and spending. Central banks watch it for signs that price rises are feeding into wages and back again.

How it is commonly misread.

An average can rise without anyone receiving a rise. If lower-paid workers lose their jobs, those remaining are better paid on average, and the figure goes up while the labour market weakens; when they are hired back it falls. That is the difference between an average and an index that fixes the mix of jobs. The figures are also in money terms: pay that rises more slowly than prices buys less.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.