Inflation is hottest in the job market as consumer and producer price data eases, and the Fed will be watching wage growth closely as rate hikes continue.
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By other indicators, the job market is cooling off. Outside the hot wage growth number, one reason the overall hires were so high in July, according to economists, is because it is getting easier for firms to find people to onboard. Increases in weekly initial unemployment insurance claims, reductions in quit rates and vacancies, slower growth in payrolls than earlier in the year, and reports of cutbacks in hiring in some sectors, were among factors the Fed cited.
But the bigger problem was the competition for workers, and that's why he thinks the labor market is coming closer to reaching an equilibrium point. Companies, from their point of view, are worried about wage growth for another reason: productivity has been declining as wages have been going up for several quarters, a lose-lose for employers."Lots of people are arguing something fundamental might have changed in the economy and there will be lower productivity forever," Taska said.
He is also hesitant to read too much into wage growth during an economic moment of softening, as history shows that lower wage jobs are typically the first to go and that can artificially inflate the wage growth data in the short term. He pointed to wage growth into slowdowns that occurred in 2008, during the"taper tantrum" of 2013 and 2014, and March 2020.
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