We’re Not Job Hopping Enough, That’s A Problem For Fed Chair Powell

from Forbes

Janet Yellen, the former Chair of the Federal Reserve of the United States and a leading labor economist, had a rule of thumb: to achieve a healthy labor market, U.S. nominal wages needed to grow 3 – 4%.  Her successor, Jerome Powell, faces a challenge; despite a U.S. unemployment rate close to multi-decade lows, nominal wage improvements have lagged.

This isn’t just a U.S. phenomenon. Research from the Organization for Economic Co-operation and Development (“OECD”) shows that since 2007, in G-7 countries, real wages increased 0.5% annually, compared to 1.3% over the previous decade. Since real-wages adjust for inflation, they tend to be a decent indicator of improving living standards. On that basis, the post-crisis recovery has been weak.

To continue to hike rates into next year, Powell needs to figure out what’s containing wages and whether that will limit economy growth.

More here.

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