The ultimate nightmare for a central banker is a wage-price spiral so you can understand a focus on wages in general but officials need to understand it’s a lagging indicator of inflation, perhaps the most lagging indicator.
ECB officials droned on about wage inflation for months and now it’s clear that it’s not a problem and they have dropped the concern (but still aren’t ready to cut). In the US, there was a freak-out about a +0.6% m/m rise in average hourly earnings last month but it’s been revised lower and it’s now clear that was skewed by a one-off drop in hours worked.
US wages are now up 4.3% y/y which is a normal rise when factoring in productivity.
The WSJ’s Nick Timiraos highlights a broader measure of wage inflation today, noting that “the index of aggregate weekly payrolls for private-sector workers, which combines hiring, wages, and hours, was up 5.3% over the last 12 months and looks like this over the last year:”
It’s right back to the pre-pandemic trend.
Right now central bankers are searching the house for the inflation boogey-monster but they’ve looked in every closet and under every bed and it’s just not there.
There is the talk about sticky services inflation but I just don’t see why it shouldn’t go back to pre-pandemic norms.