The Federal Reserve continues to believe that wage growth in the US is too high and contributing to inflation, according to Fed chair Jerome Powell.
The Employment Cost Index (ECI), the most commonly watched measure of labor costs to employers, rose 4.3 percent last quarter and 4.4 percent over the last two. Assuming productivity growth at its recent trend (1.4 percent annually), these data suggest that labor costs are rising by 3% – above the Fed’s target of 2% but consistent with a moderately higher target advocated by economists like Paul Krugman and Olivier Blanchard.
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