The Real Wage Growth Puzzle

“Reports from District contacts indicated that some businesses facing tight labor markets found it more effective to expand their workforces by using a variety of nonpecuniary means, including offering < job flexibilty and training, rather than increasing wages.”@federalreserve

(1) “But if you’re Deutsche Bank, you’re not buying the idea that there’s a real-wage growth “puzzle.” Because if you’re Deutsche Bank, what you’ve done is corrected for an improperly measured unemployment gap. I’m not going to bore you with that, but suffice to say…

(2) the bank thinks the unemployment rate is not the best way to measure slack in the labor market and once you “correct” for that and assume a lag between labor market tightness and an uptick in wage growth, the fit is better.

(2) the bank thinks the unemployment rate is not the best way to measure slack in the labor market and once you “correct” for that and assume a lag between labor market tightness and an uptick in wage growth, the fit is better.

Bring it full circle here. (1) “This decline can reasonably be attributed to the positive supply shock to oil prices (60%+ decline from mid-14 to mid-16). This interpretation would be consistent with several factors: (a) the timing of the drop in inflation expectations (Q1-15), (b) the fact that neither the predicted end of cycle nor the expected pick-up in inflation occurred and (c) the relative outperformance of Europe (which benefits more than the US).” Via DB cira Mr. @heisenbergreport

(1)”You can look at this one of two ways in the context of the recent rise in crude prices: 1) it will provide the impetus for central banks to finally move forward with normalization thereby replenishing their ammo for the next downturn, 2) it will catch the central banks behind the curve and force them to tighten more aggressively than the market anticipates thereby accelerating the timetable on that same inevitable downturn. Those two points are mutually exclusive.” Mr. White

And just because I like it a lot.

Sincerely,

-R.W.N II

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