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Feb 17 2022

A Wage Spiral Or COVID Labor-Supply Shock?

  • Feb 17, 2022

Due to recent, rapid wage gains, the prospect of a developing wage-price spiral has exacerbated concerns that the Federal Reserve is significantly behind the curve with fighting inflation. As shown in Chart 1, the Atlanta Fed Wage Growth Tracker has surged from 3% last May to 5.1% in January. That is substantially above its 3% to 4% average range in recent years and marks its highest annual increase in 20 years! Such a swift and large rise in wage inflation is alarming because it will almost assuredly force businesses to boost prices, which, in turn, could force workers to demand even higher wages. Ergo, this chart highlights that a wage-price spiral may already be in force.


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About The Author

James Paulsen / Chief Investment Strategist