Must-Read: Nick Bunker: What’s the deal with U.S. wage growth?
Must-Read: Suppose you put someone in cryogenic sleep a decade ago, woke them up today, showed them this graph:
and said: “The U.S. Federal Reserve still has the same 2%/year inflation target it had in the early 2000s. Do you think it should raise or lower interest rates in June?”
I cannot think of a single reason why such a person would say “raise interest rates” (unless, of course, their compensation was an increasing function of the interest rate).
: What’s the deal with U.S. wage growth?: “The U.S. unemployment rate has been at or under 5 percent for more than six months…
…But… neither inflation nor wage growth has picked up considerably, despite expectations that they would…. First… the unemployment rate may be slightly overstating the health of the country’s labor market. Measured by the employed share of workers ages 25 to 54, the labor market has a long way to go before it hits a level usually associated with strong wage growth…. Adam Ozimek… points out that… low inflation has an impact on wage growth, because employers will be less willing to pass along wage hikes to prices, and employees will need less of a wage increase…. A third argument is that… low measured wage growth is due in part to low-wage workers moving into full-time employment…. Already-full-time employees are seeing rising wages, that growth is masked by the entrance of lower-earning workers…. It seems likely… that… five percent just isn’t what it used to be…