Average Hourly Earnings (AHE) explained

By Ken Chigbo, Founder, KenMacro. Published 2026-05-13.

What is average hourly earnings?

Average Hourly Earnings is a sub-component of the monthly US Employment Situation report published by the Bureau of Labor Statistics, released alongside Non-Farm Payrolls and the unemployment rate. AHE measures the average gross hourly pay of private sector production and non-supervisory employees, reported as both a month-on-month percentage change and a year-on-year percentage change. It captures wage pressure in the labour market and acts as a proxy for underlying services inflation, particularly the sticky components that the Federal Reserve tracks when calibrating the policy rate. The series excludes benefits, bonuses paid outside regular payrolls, and government workers.

How traders use average hourly earnings

The desk treats AHE as the second most market-moving line in the NFP print, after the headline payrolls number itself. A hot year-on-year wage figure can override a weak headline payrolls reading because it directly feeds the Fed's services inflation concern, pushing the dollar higher and front-end yields up. A soft AHE reading does the opposite, even when headline payrolls beat expectations. Retail traders typically watch the year-on-year figure against consensus and the month-on-month against three-month and six-month trends. Institutional desks decompose the print by sector, strip out base effects, and compare AHE against the Employment Cost Index and the Atlanta Fed Wage Tracker for confirmation. The release lands on the first Friday of each month at 8:30am ET, and short-dated volatility in EUR/USD, USD/JPY, and front-end Treasuries typically spikes in the minutes around it.

Common misconceptions about Average Hourly Earnings

Traders often assume AHE is a clean read on labour market tightness. It is not. Compositional shifts distort the series: when low-wage workers are laid off in a downturn, average pay mechanically rises even if no individual got a raise. The opposite happens during hiring booms in lower-paid sectors. AHE also excludes bonuses paid outside regular payrolls, so finance-heavy compensation cycles are understated. Another misconception is that month-on-month prints are reliable. They are noisy and frequently revised, so the desk anchors decisions to the year-on-year figure and three-month annualised trend rather than any single monthly surprise.

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Frequently asked

When is Average Hourly Earnings released?

AHE is published as part of the US Employment Situation report by the Bureau of Labor Statistics. The release lands on the first Friday of each month at 8:30am Eastern Time, covering data for the preceding month. It is reported alongside Non-Farm Payrolls, the unemployment rate, labour force participation, and average weekly hours. Traders should treat the entire bundle as a single event, since the market reaction often depends on the combination of headline payrolls and wage growth rather than either figure in isolation.

Why does the Fed care about AHE?

Wage growth is a primary driver of services inflation, which is the stickiest component of the Consumer Price Index and the Fed's preferred PCE measure. Persistent wage gains above productivity growth feed through to service prices, making the inflation target harder to reach. The Fed therefore monitors AHE alongside the Employment Cost Index and the Atlanta Fed Wage Tracker. Strong wage prints support a hawkish reaction function, while softening wages give the Fed cover to ease policy.

What is a strong AHE reading?

There is no fixed threshold, because the relevant level depends on productivity growth and the Fed's inflation target. Historically, year-on-year AHE around the low three percent range is consistent with two percent inflation. Readings sustained above four percent year-on-year have been associated with above-target inflation episodes. The desk focuses on the trend and on the gap between AHE growth and productivity growth, rather than judging any single print as strong or weak in isolation.

How does AHE differ from the Employment Cost Index?

AHE is monthly, covers only hourly pay for private sector production and non-supervisory employees, and excludes benefits and irregular bonuses. The Employment Cost Index, published quarterly by the BLS, covers total compensation including benefits, is adjusted for compositional shifts between industries and occupations, and is generally considered the cleaner measure of underlying wage pressure. Most institutional desks treat ECI as the higher-quality signal and AHE as the higher-frequency, more tradable release.

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