Bush aide: energy costs eating into paychecks

WASHINGTON (Reuters) – A White House economic adviser said
on Thursday that higher energy costs were a key factor
restraining the real earnings of U.S. workers but predicted
wages would soon pick up.

The Bush administration has touted strength in gross
domestic product and jobs-growth figures as evidence that its
tax-cutting policies are working. But critics have countered
that many Americans are not feeling more prosperous because
their incomes are flat on an inflation-adjusted basis.

Asked about this discrepancy, Matthew Slaughter, a member
of President George W. Bush’s Council of Economic Advisers,
pointed to the recent surge in oil prices.

“Higher-than-expected increases in energy prices have been
eating into the real income gains for American workers and
households,” he said.

But he also said growth in U.S. productivity at a brisk
pace of more than 3 percent over the last five years may
portend faster wage growth.

Slaughter said the current business cycle may mirror that
of the 1990s, when strong wage growth did not initially
accompany a productivity acceleration but did occur later on.

“It is hoped for going forward that … a similar catch-up
will happen,” Slaughter said. “The underlying strength of the
U.S. labor market suggests it will.”

According to the latest data from the Labor Department,
average weekly earnings have risen 3.6 percent since January
2005, but since inflation has climbed even faster, the real
earnings of Americans dropped 0.4 percent over that period.