Lauding Labor
As Labor Day approaches, we see a trend in wage growth that bodes well for the economy, but poses an obstacle for businesses trying to manage wage cost pressures. ​​​​

Chart for AOM​​

  • The Federal Reserve Bank of Atlanta calculates wage growth by comparing year-over-year data for the same households in an effort to depict the true underlying trend. Recent data suggests wages are accelerating, growing 4.3%, the fastest since before the Global Financial Crisis.

  • Higher skilled workers are seeing faster wage growth than lower skilled workers. By gender, wage growth is roughly equal.

  • Accelerating wage growth hasn’t translated into faster inflation. Indeed, inflation is significantly below the Federal Reserve’s target of 2%. The historically strong relationship between wages and prices has seemingly broken down as explained in Alger On the Money “What Economists Are Missing​.”

  • Of course, higher wages are problematic for some companies, particularly those for which employee compensation is a large percentage of profits; examples include retailers and restaurants. Software companies and health care equipment providers, however, don’t have the same issue with wages because they pay a lower proportion of compensation relative to their profits.



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