Saturday, July 16, 2016

Wages vs. CPI June 2016

This is the year over year change in wages for all employees and the consumer price index.

In the business cycle theory, at least Keynesian business cycle theory, wages going up create cost push inflation.  Economists hate that.

All employee wages had been rising steadily along the 2% line.  Recently all employee wages has increased simultaneous with CPI all items.  Wages up 2.6% are growing faster than the CPI up 1%.  This is great. Right?

Here is a long term view using wages of production and non-supervisory employees.  Rising wages get the blame for inflation but it looks like sometimes wages are just following inflation.  Doesn’t matter.  When wages or CPI reach 4% year over year growth the Fed is going to cool things down.  We are far from that 4% meaning the economy has room, and time, to grow.

No comments:

Post a Comment