MNI TRANSCRIPT: Powell on Wage Gains

     WASHINGTON (MNI) - The following is the portion of a transcript from

Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting

Wednesday:

     Q: Why aren't we seeing stronger wage gains? Wages are growing more slowly

now than they were toward the beginning of the year. Why is that?

     A: Well, wage gains have moved up a bit, if you look back three, four

years, you will see wages are growing around 2 percent, now you see them moving

up more 3, 3 and a half percent. Why aren't they growing higher, at a faster

rate? It's a couple of things. I think there are a range of explanations. One

would be that productivity has just been low. Wages should go up to cover

inflation and productivity. Productivity has been low, and that is very likely

holding back wages...Productivity has been low, and that is very likely holding

back wages...So you do see, wages are going up the most for people at the lower

end of the, that has been true for the last couple years, lower end of the wage

spectrum. You do see wages moving up, they are not moving up at very high rates,

and at the end of the day, that probably has most to do with productivity.

     Q: As far as the market not being as tidy as you thought, you are saying

there is more people on the sidelines that could join the labor force?

     A: Yes, I would also say that we, if you ask people and we did ask people

what do you think the natural rate of unemployment is, people were writing down

numbers in the 5s and then writing down numbers in the 4s. Now unemployment has

been in the 3s for a year and a half. We still see wage inflation, as you

mentioned, the level of wage inflation has actually moved down, although there

may be compositional effects in that number. That may be, to some extent, about

younger workers coming in at lower wages than retiring workers but that

shouldn't have much of an effect actually. Why is it, it may be that there is

more slack in the economy, and I think we are seeing that, we are seeing really,

it showed up through higher participation. For many years we thought that there

is a trend decline in participation, notwithstanding that against that trend we

have seen prime age participation moving up steadily over the last two or three

years. It's a very positive thing. But it does provide more labor supply,

meaning a less tight labor market.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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