No Sign of Wage Growth Moderation Yet

Taps Coogan – April 21st, 2023

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As recently noted by Mohamed El-Erian, the Atlanta Fed wage tracker is showing no signs of moderating inflationary pressures.


According to the Atlanta Fed, overall wage inflation remains at 6.4% and very near the 40-year highs made last June was CPI inflation peaked.

A lot of emphasis tends to get put on the concept of a wage-price inflation spiral whereby price inflation leads to ‘wage inflation’ which feeds back into price inflation.

In reality, all forms of inflation lead to cost pressures and inflation elsewhere else in the economy; wages are no exception. The only thing that is different about wage inflation is that it tends to be lagging, as is the case with most labor market statics. That is not only because people’s wages aren’t adjusted daily like other prices but because companies are hesitant to layoff workers that they just recently had such a hard time sourcing. People confuse that lag with some kind of special feedback loop.

The most remarkable thing about the chart above is not how high wage growth is, it’s been below the inflation rate for most of the past two years, it’s that the Fed was still doing quantitative easing just two months before the peak last June.

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