4 posts on "Wage inflation"
March 7, 2024
Will the Moderation in Wage Growth Continue?
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.
February 23, 2023
A Turning Point in Wage Growth?
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.
August 4, 2022
Pandemic Wage Pressures
The recovery since the onset of the pandemic has been characterized by a tight labor market and rising nominal wage growth. In this post, we look at labor market conditions from a more granular, sectoral point of view focusing on data covering the nine major industries. This breakdown is motivated by the exceptionality of the pandemic episode, the way it has asymmetrically affected sectors of the economy, and by the possibility of exploiting sectoral heterogeneities to understand the drivers of recent labor market dynamics. We document that wage pressures are highest in the sectors with the largest employment shortfall relative to their pre-pandemic trend path, but that other factors explain most of the wage growth differentials. We suggest that one key factor is the extent of physical contact that has had to be compensated for by offering higher wages. One implication of our analysis is that, as COVID-related factors recede, sectoral imbalances could be restored from the supply side as employment recovers back toward the pre-pandemic trend.
November 19, 2014
The Long‑Term Unemployed and the Wages of New Hires
This is the third in a series of blog posts on the topic of measuring labor market slack. In this post, we assess the relationships between short- and long-term unemployment and wages by comparing the differences in states’ experiences over the business cycle.
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