The August Job report showed weak new hiring and a sharp rise in wages. The average hourly earnings increased by 0.6%, which is double the estimate of Wall Street for this month. The Leisure and Hospitality industry witnessed a 1.3% jump in wages for the month of August. Fed Officials have had thoughts about pulling back the historical easy monetary policy. It was implemented during the early Covid-19 pandemic. This situation might be worrisome and has to be taken considered carefully by the Federal Reserve.
Unemployment is on a rise
According to one Citigroup economist, a high employment rate of 5.2% and rapidly rising wages has led to a build-up of inflationary pressure in the overall economy. This will greatly impact the current job situation. September is expected to bring more high-level job openings and wage increases. Many experts have suggested that the continued rise in wages signal demand is a major factor. Experts also suggest that skill mismatch has also been a major reason for the rising inflation levels and wage rise, not witnessed earlier in the decade.
Other major concerns
It is being considered that supply chain issues and other issues have led to a spurt in inflation, which needs to be abated. Per unit labor costs are still comparatively lower for companies as per the productivity ratios. The current wage rise is seen as consistent with the long-term inflation objective. Rising wages can also be considered positive in some sense. Fed officials have also been expecting high inflations and rising home prices. The chief economist of Moody’s Analytics commented, they have been analyzing inflation constantly, but inflation has not been yet at the red signal, not even yellow.
This is a major concern that advanced economies have to look into and come up with an appropriate solution for. The labor market needs to be developed and the Federal Reserve also needs to implement measures to deal with the broadening inflationary pressures.