Here's what higher pay means for inflation.
By those numbers:In the final quarter of 2022, average hourly earnings rose at a 4.7% annualized rate. But last quarter, wages increased at a 3.2% annualized rate .
That pace of wage growth is consistent with inflation settling at the Fed's 2% target. It's also similar to the pace seen in the same time period in 2019.Higher labor bills are "going to be fading as an excuse for companies to keep prices rising," James Knightley, an economist at ING, tells Axios. Knightley adds: "A lot of the inflation that we still see today is basically margin expansion," or higher corporate profits.Economists are watching for more compensation data to confirm the story. The employment cost index, known to be closely watched by Powell, is released on Friday.
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