There is an old joke about how economics is the only field in which two people can share a Nobel Prize for saying opposing things.
Which came to mind as two stories in the Wall Street Journal seemed to reach differing conclusions. Or, at least, illustrate differing perspectives on the same story.
First, there was a piece in the Journal about how "workers who stay put in their jobs are getting their heftiest pay raises in decades, a factor putting pressure on inflation.
"Wages for workers who stayed at their jobs were up 5.5% in November from a year earlier, averaged over 12 months, according to the Federal Reserve Bank of Atlanta. That was up from 3.7% annual growth in January 2022 and the highest increase in 25 years of record-keeping." In addition, the Journal writes, "Employees who changed companies, job duties or occupations saw even greater wage gains of 7.7% in November from a year earlier. The prospect that employees might leave for bigger paychecks is a main reason companies are raising wages for existing employees."
The problem is that "faster wage growth is contributing to historically high inflation, as some companies pass along price increases to compensate for their increased labor costs. Prices rose at their fastest pace in 40 years earlier in 2022. Inflation has cooled in recent months but remains high. Federal Reserve officials are closely monitoring wage gains as they consider future interest-rate increases to slow the economy and bring down inflation."
These officials may have been relieved to read another Journal story about how "the labor market proved to be a resilient stabilizer in 2022 for a U.S. economy facing the highest inflation in four decades.
"With the Federal Reserve having raised interest rates at the fastest pace since the early 1980s to fight inflation, however, the economy has slowed, and effects of that are filtering into hiring and wages."
The Journal writes that "many workers aren’t feeling the pay gains … Wages for all private-sector workers declined by 1.9% over the 12 months that ended in November, after accounting for annual inflation of 7.1%, according to the Labor Department." Indeed, the Journal writes, "There are signs wage gains are beginning to ease as the tight labor market loosens a bit. Average hourly earnings were up 5.1% in November from a year earlier, slowing from a recent peak of 5.6% in March. Many analysts expect wage growth could cool further in coming months."
- KC's View:
Which reminds me of yet another joke about economists…
The First Law of Economics is that for every economist, there exists an equal and opposite economist.
The Second Law of Economics? They're both wrong.
Let's be clear. I'm no economist. Never even taken an economics class. So I make jokes with the understanding that if economists want to make pundit jokes, people of my ilk are fair game.
While these two stories reflect, I think, the vagaries of economics, I also think they illustrate the unique historical moment in which we find ourselves. In some ways, even as we deal with inflation and growing fears about recession, there are elements of the economy that still are cooking, which doesn't make it any easier on regulators.
Just easier on joke writers.