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Powell Sees Little Risk of Wage Price Spiral

FED

Last Q: What can workers expect wage-wise going forward?

  • A: Wages have moved up, driven by new hires, much driven by low paid jobs in the service industries as people come back. We don't see wage inflation that can lead to price inflation. We're not seeing that right now - moving up in a way that is hard for companies to manage, and puts them in a situation where they have to accept substantially lower margins or raise prices.
  • When it happens gradually, sometimes unit labor costs do move on and put some pressure on margins. The problem is if it happens in a way that pushes firms broadly into raising prices. It was called the wage price spiral - but we don't see that now. This was something that was a feature of the high inflation era of the great inflation.
  • It's not a feature now and we don't see that now. Of course we'll be watching it. We'd like to see matching so people get back to work. Wages moving up across the spectrum consistent with inflation and productivity is a good thing.

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