Tight U.S. labor market keeps upward pressure on wages; inflation …

Jul 29, 2022 · U.S. labor costs increased strongly in the second quarter as a tight jobs market boosted wage growth, which could keep inflation elevated and give the Federal Reserve cover to continue its ...

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Rapid Wage Growth Keeps Pressure On U.S. Inflation - WSJ

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Pay increases have exceeded an annual 5% every month this year as companies vie for workers in tight job market, a factor contributing to four-decade high U.S. inflation.

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FAQs about Tight U.S. labor market keeps upward pressure on wages; inflation … Coupon?

Are labor market tightness and wage inflation related?

This Economic Commentary explores the connections among labor market tightness, wage inflation, and price inflation at the service sector level. Across most service sectors, sector-specific labor market tightness and nominal wage growth have been above prepandemic averages since 2022. ...

How does inflation affect workers and labor markets?

The authors construct a model to examine how inflation affects workers and labor markets. By reducing real wages, inflation prompts workers to renegotiate pay, search for better jobs, or quit, driving job-to-job transitions and increased vacancies while keeping unemployment largely unchanged. ...

Why did labor costs increase in the second quarter?

Our Standards: The Thomson Reuters Trust Principles. U.S. labor costs increased strongly in the second quarter as a tight jobs market boosted wage growth, which could keep inflation elevated and give the Federal Reserve cover to continue its aggressive interest rate hikes. ...

Does labor market tightness affect wage growth?

Across most service sectors, sector-specific labor market tightness and nominal wage growth have been above prepandemic averages since 2022. The data suggest that a stronger positive relationship between labor market tightness and wage growth has emerged in the aftermath of the pandemic. ...

Does labor market tightness lead to more disinflation?

However, it is worth noting the earlier finding that wage growth adjusted for labor productivity in the leisure, hospitality, and other services sector has already returned to prepandemic levels, suggesting that to see even more disinflation in this sector would require a bigger reduction in labor market tightness. ...

How does tightness affect wage inflation?

However, on average, these pay gains have not yet resulted in additional spending power due to higher price inflation. The overall impact of increased tightness on wage inflation has been more moderate so far, at least 1.5 percentage points in both countries. ...