The growth rate of average hourly earnings has accelerated to 2.5%, from a norm of nearer 2.0% in recent years, and other measures like the Atlanta Fed’s tracker suggest that median wage growth is closer to 3.5% now. It is not all good news, however, with the employment cost index still suggesting that wage growth is close to 2.0%. Some of the survey evidence, in particular households’ net income expectations in the Conference Board’s consumer sentiment survey, have also dropped off in recent months. Nevertheless, in an environment where annual productivity growth of 1.0% might now be the best we can hope for, there is a lot less scope for wage growth to accelerate further without a corresponding pick-up in price inflation above the Fed’s 2% target.
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