If You Ever Wondered Whose Side The Federal Reserve Is On...

Real wage growth is consistent with productivity, thus there is no excess slack in the labor market. If you think this is some crazy hawk-talk, think again. Fed Chair Janet Yellen, July: “The growth rate of output per hour worked in the business sector has averaged about 1 1/4 percent per year since the recession began in late 2007 and has been essentially flat over the past year. In contrast, annual productivity gains averaged 2-3/4 percent over the decade preceding the Great Recession. I mentioned earlier the sluggish pace of wage gains in recent years, and while I do think that this is evidence of some persisting labor market slack, it also may reflect, at least in part, fairly weak productivity growth.” For more than three decades, the pace of productivity growth has exceeded that of real compensation: Real median weekly earnings have grown 8.6% since 1985. Nonfarm output per hour is up 79% over that time. Every time labour might get an upper hand, the Federal Reserve looks to hold the line on wage growth. Full blog post (VIEW LINK)


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