Will Wages Push Inflation Even Higher?
- By Sam van de Schootbrugge
- 7 min read
Summary
• A new NBER working paper co-authored by economist Larry Summers looks at the current US labour market conditions to predict wage growth.
• It finds that the vacancy rate and quits rate are the best indicators of labour market tightness, and their current levels imply that the unemployment rate should be below 2% instead of 4%.
• Consequently, annual wage growth will likely exceed 6% by 2023, significantly higher than anything the US has seen in the 21st century.
• The cause is the demand for labour combined with the shortfall in employment, which the authors believe is unlikely to change in 2022.
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I know that real earnings have fallen, is there a stimulus route the Fed could take that does not contradict their priority of fighting inflation?
and this paper looks only at wage, we have not even considered other shortages