Oct 10, 2018

The Search for Real — Not Nominal — Wage Gains

Scott Sumner Ralph G. Hawtrey Chair Emeritus of Monetary Policy

On Friday, the government announced average hourly wage growth for October, which came in at an annual rate of 2.8 percent.

The case was similar in September, and the media reported that Fed officials may react by tightening monetary policy. Not surprisingly, this puzzles lots of people: Shouldn’t we welcome higher wages, especially after decades of sub-par wage growth? 

The short answer is that we should welcome higher “real” wages, but the Fed does have reason to be concerned about higher “nominal” wages. Wading further into the details, while tricky, can provide some much-need clarity for decision-makers...

Continue reading: In search of real — not nominal — wage gains

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