It shows wage inflation DECREASING. More importantly, it shows wage inflation decreasing BEFORE consumer price inflation peaked.
Which means it is mathematically impossible for rising wages to be contributing to current and future consumer price inflation.
If the Fed said wage inflation was a factor in 2021 consumer price inflation, they'd have a point. They are not saying that. They are saying that wage inflation is a factor in 2022 consumer price inflation.
I'm merely stating that when inflation is high, people tend to ask for higher wages. Unions have vocally reported that they are asking for higher wages because of inflation. And that is pretty 101. And as long as there is labor shortage - and there still is in many sectors, especially the extremely price sensitive low wage sectors like retail and fast food - there will be strong upwards price pressure.
Wages are still going up. It is just that the price pressure is less than it was during the forced labor shortages due to mandatory covid-throttle placed on many sectors. So the fact we peaked only means throttle-induced inflation was larger than the current inflation-response wage increases.
But a > 4% labor increase year over year is still huge, and we both know that did not all happen in 2021. That is still happening today. As said, low wage sectors are still desperate to get workers and offering 10-20-30% wage increases just to get workers. I still see major chains shut down and reducing hours simply because they cannot keep the joint staffed.
In fact that may be the only real counter-argument I can think off. If you look at the second graph you quote you see a HUGE increase in average hourly wages right when covid hit. Of course we all know that is in large part because we mandatory fired all the low wage workers in many sectors. Actual wage increases in early 2020 were not high, but a 'work from home' person just earns a lot more than a fast-food operator. If we look at the labor market today, we see that part-time or more exact 'irregular hour workers' have not rejoined the labor market everywhere or at least not fast enough as the end of covid measures would have allowed. So the average mix of workers is today still slanted towards these higher earnings jobs. So wage inflation may be overestimated. (Then again, then it may now also only be going down because of many layoffs in high wage jobs ...)
It will be interesting to see what will give. Will these workers return? Or will employers give up and go the European way by automating (e.g. construction prefab like in most of Europe) and eliminating (the grocery bag packer, walmart waver, "just wait longer before getting a waiter/check", restaurant water bringer, stores close at 6pm and weekends, etc) the jobs away. How much are Americans willing to pay for a fast cheeseburger or being able to shop past 6pm and weekends?
Look again at the second graph.
https://fred.stlouisfed.org/graph/?g=Wwcd
It shows wage inflation DECREASING. More importantly, it shows wage inflation decreasing BEFORE consumer price inflation peaked.
Which means it is mathematically impossible for rising wages to be contributing to current and future consumer price inflation.
If the Fed said wage inflation was a factor in 2021 consumer price inflation, they'd have a point. They are not saying that. They are saying that wage inflation is a factor in 2022 consumer price inflation.
The data says they are wrong. Entirely wrong.
But slowing down still means moving forward.
I'm merely stating that when inflation is high, people tend to ask for higher wages. Unions have vocally reported that they are asking for higher wages because of inflation. And that is pretty 101. And as long as there is labor shortage - and there still is in many sectors, especially the extremely price sensitive low wage sectors like retail and fast food - there will be strong upwards price pressure.
Wages are still going up. It is just that the price pressure is less than it was during the forced labor shortages due to mandatory covid-throttle placed on many sectors. So the fact we peaked only means throttle-induced inflation was larger than the current inflation-response wage increases.
But a > 4% labor increase year over year is still huge, and we both know that did not all happen in 2021. That is still happening today. As said, low wage sectors are still desperate to get workers and offering 10-20-30% wage increases just to get workers. I still see major chains shut down and reducing hours simply because they cannot keep the joint staffed.
In fact that may be the only real counter-argument I can think off. If you look at the second graph you quote you see a HUGE increase in average hourly wages right when covid hit. Of course we all know that is in large part because we mandatory fired all the low wage workers in many sectors. Actual wage increases in early 2020 were not high, but a 'work from home' person just earns a lot more than a fast-food operator. If we look at the labor market today, we see that part-time or more exact 'irregular hour workers' have not rejoined the labor market everywhere or at least not fast enough as the end of covid measures would have allowed. So the average mix of workers is today still slanted towards these higher earnings jobs. So wage inflation may be overestimated. (Then again, then it may now also only be going down because of many layoffs in high wage jobs ...)
It will be interesting to see what will give. Will these workers return? Or will employers give up and go the European way by automating (e.g. construction prefab like in most of Europe) and eliminating (the grocery bag packer, walmart waver, "just wait longer before getting a waiter/check", restaurant water bringer, stores close at 6pm and weekends, etc) the jobs away. How much are Americans willing to pay for a fast cheeseburger or being able to shop past 6pm and weekends?
"when inflation is high, people tend to ask for higher wages."
That makes consumer price inflation a driver of wage price inflation, not the reverse.
Yes, that is what I said in my initial reaction. It is a multiplier.
(The multiplier can be <1 of course. it doesn't have to be a spiral like in classic cases.)