Wage inflation slows, helping the White House breathe easier

Wage inflation slows, helping the White House breathe easier

Illustration: Sarah Grillo/Axios

The Fed is watching closely upward pressure on wages in basic services, excluding the housing market. Apparently, the White House too.

  • Today, President Biden’s economic advisers released data that shows a noticeable slowdown in wage gains in these sectors.

why is it important: It’s rare to see the White House tout the merits of slowing wage growth, but developments there could set the course for inflation.

Driving the news: In a blog postthe White House Council of Economic Advisers describes a time series they have constructed which they believe better measures wage growth in non-housing basic service industries (or NHS, as they deem it) .

  • Their data shows that average hourly earnings rose at a record 8% annual rate for production, non-supervisory workers in these industries early last year. For all private sector workers in these industries, it was 7%.
  • But by December, both of these measures of average hourly earnings growth had slowed, rising at an annual rate of about 5%.

Zoom out: As long as the labor market remains tight, Powell said, these industries – which range from hair salons to education and restaurants – are most likely to pass on higher costs to consumers. This could push up inflation.

The bottom line: The current rate is probably still too hot for the Fed’s liking. But, at least by this measure, it suggests wage pressures are easing.

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