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Federal Reserve Bank of Richmond
Richmond Fed Economic Brief
How Should the Fed Interpret Slow Wage Growth?
Marianna Kudlyak
Thomas A. Lubik
Karl Rhodes

During the current recovery, policymakers have debated whether slow wage growth indicates labor market "slack" that is not adequately reflected in the unemployment rate alone. The relationship—or lack thereof—between the unemployment rate and wage growth has challenged macroeconomists for decades. Empirical studies using micro data find that individual wages are procyclical, but attempting to use aggregate measures of wage growth to determine the level of "slack" in the labor market would be highly difficult and potentially misleading.

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Marianna Kudlyak & Thomas A. Lubik & Karl Rhodes, "How Should the Fed Interpret Slow Wage Growth?" , Federal Reserve Bank of Richmond, Richmond Fed Economic Brief, issue February, pages 1-5, 2015.
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