U.S. Outlook: The wage growth conundrum
Wage growth has been modest during the current economic expansion, despite healthy job growth that has resulted in a tight labor market.
This has puzzled economists and policy makers.
For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on July 13.Key observations:
- The moderate pace of wage growth since the end of the Great Recession is unusual compared to previous expansions, when wage growth rebounded more rapidly and sharply.
- Theories for the weak wage growth range from outsourcing to a lack of productivity growth to the presence of shadow slack in the labor market.
- Given the recent rise in nominal wage rigidities over the past three months through March (the latest data point available), it is unlikely that wage growth will accelerate dramatically in 2019 if this long-term historic relationship holds.