The cooling off of wage growth was evident in an analysis of data by Jason Furman, a Harvard professor of economics and former top economic advisor to President Barack Obama. (Furman compiled the figures using data from Friday’s government report on job creation, but adjusted it so it wouldn’t be distorted by how many jobs were gained and lost in various high and low-paying industries.) “Wage growth is moderating a little bit but it’s also still very high,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “It’s consistent with a sustainable moderation rather than a significant downturn.” The Federal Reserve is in the midst of a campaign to quash inflation by raising its benchmark interest rate, a tactic designed to increase the cost of loans throughout the economy, discouraging borrowing and spending to rebalance supply and demand. This method risks slowing the economy too much and causing a recession. So where does wage growth fit in? If companies have higher payroll costs because they have to pay their workers more, they are likely to pass on that burden to the consumer by raising prices, fueling inflation. So the Fed might react to economic reports of rapid wage growth by hiking interest rates aggressively, increasing the chance of a recession, Bunker said. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
