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3 posts on "wage growth"
May 15, 2024

Do Unexpected Inflationary Shocks Raise Workers’ Wages?

Jacob Weber

Photo: two construction workers working on a new building wearing hard hats.

The past year’s steady decline in nominal wage growth now appears in danger of stalling. Given ongoing uncertainty in Ukraine and the Middle East, this seems an opportune moment to revisit the conventional wisdom about the relationship between inflation and wages: if an unexpected increase in energy costs drives up the cost of living, will workers demand higher wages, reversing the recent moderation in wage growth? In new work with Justin Bloesch and Seung Joo Lee examining those concerns, our analysis shows that the pass-through of such inflationary shocks to wages is weak. 

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Posted at 7:00 am in Inflation | Permalink
March 7, 2024

Will the Moderation in Wage Growth Continue?  

Martin Almuzara, Richard Audoly, Augustin Belin, and Davide Melcangi

Photo of women in an electronics Factory Worker in Blue Work Coat and Protective Glasses is Assembling Smartphones with Screwdriver. High Tech Factory Facility with more Employees in the Background.

Wage growth has moderated notably following its post-pandemic surge, but it remains strong compared to the wage growth prevailing during the low-inflation pre-COVID years. Will the moderation continue, or will it stall? And what does it say about the current state of the labor market? In this post, we use our own measure of wage growth persistence – called Trend Wage Inflation (TWIn in short) – to look at these questions. Our main finding is that, after a rapid decline from 7 percent at its peak in late 2021 to around 5 percent in early 2023, TWin has changed little in recent months, indicating that the moderation in nominal wage growth may have stalled. We also show that our measure of trend wage inflation and labor market tightness comove very closely. Hence, the recent behavior of TWIn is consistent with a still-tight labor market.  

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Posted at 12:00 pm in Employment, Inflation, Labor Market | Permalink
February 23, 2023

A Turning Point in Wage Growth?

Martin Almuzara, Richard Audoly, and Davide Melcangi

The surge in wage growth experienced by the U.S. economy over the past two years is showing some tentative signs of moderation. In this post, we take a closer look at the underlying data by estimating a model designed to isolate the persistent component—or trend—of wage growth. Our central finding is that this trend may have peaked in early 2022, having experienced an earlier rise and subsequent moderation that were broad-based across sectors. We also find that wage growth seems to be moderating more slowly than the trend in services inflation.

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Posted at 7:00 am in Inflation, Labor Market, Macroeconomics | Permalink

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