Tags: wage | growth | unemployment | rate | jobs

Wage Growth Fails to Flourish Despite Unemployment-Rate Drop

Wage Growth Fails to Flourish Despite Unemployment-Rate Drop
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Friday, 03 November 2017 11:09 AM

Central bankers are talking a lot about wages. With inflation staying stubbornly low in developed economies, they’re hoping that workers will ask for more pay as labor supply shrinks.

U.S. payroll figures released on Friday perfectly illustrate the problem: the country’s jobless rate fell to the lowest since 2000, and still wage growth is stalled. In Europe, monetary officials are scratching their heads over a similar trend.

Ewald Nowotny, who sits on the Governing Council at the European Central Bank, cited a punchy description of the problem at a conference in London on Friday.

“There’s a big international discussion about why wages react so slowly to downward changes in the unemployment rate -- this is the famous Phillips curve problem. We had just recently a meeting at the Bank for International Settlements where Bill Dudley, the central-bank governor of New York, said that in the U.S. the Phillips Curve now is ‘flat as Kansas,’” Nowotny said.

Dudley has expressed confidence that pressure on resources will lift wages and inflation over time. Nowotny also sees some potential for income gains in the euro area, particularly in Germany, the region’s largest economy, which has record-low unemployment. If so, that will certainly spell relief for officials after years of struggling to reach their inflation goal.

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Central bankers are talking a lot about wages. With inflation staying stubbornly low in developed economies, they're hoping that workers will ask for more pay as labor supply shrinks.
wage, growth, unemployment, rate, jobs
212
2017-09-03
Friday, 03 November 2017 11:09 AM
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