Discussion Paper

Are Signs of Labor Market Normalization Reflected in Wage Growth?

Abstract: There have been two salient features of the U.S. economy in the past two years: a tight labor market and high inflation. In the Richmond Fed business surveys, the tight labor market has manifested in a high employment index combined with a low availability of skills index; high inflation has corresponded with extreme elevation in our survey's measures of growth in prices paid and prices received. Recently, all of these survey measures have either reached or made notable progress toward reaching more historically normal levels. It is hard to imagine, however, a rebalanced labor market or reaching a 2 percent inflation target without aggregate wage growth returning to pre-COVID-19 norms.

Keywords: labor market; 5th district; wage growth;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Regional Matters

Publication Date: 2023-07-28