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The Relationship between Wage Growth and Inflation, One Recession Later
Periods of high inflation generally are periods of low real wage growth. In the aftermath of the pandemic recession, is that still the case?
Discussion Paper
Wage Growth over Unemployment Spells
This article looks at the wage growth associated with a spell of unemployment during the past three recessions. Our main findings are threefold. First, half of all unemployed workers experience a lower hourly wage once they regain employment. Second, afteran unemployment spell, older workers and those without a college degree experience lower wage growth. Third, workers who regain employment in a different industry than they were in previously tend to experience a substantial wage decline. The analysis suggests that the COVID-19 pandemic not only led to unprecedented job losses, but it could ...
Journal Article
Rising Immigration Has Helped Cool an Overheated Labor Market
The United States has experienced a substantial influx of immigrants over the past two years. In 2023, net international migration surpassed its pre-pandemic peak. This flow of immigrant workers has acted as a powerful catalyst in cooling overheated labor markets and tempering wage growth across industries and states.
Discussion Paper
Are Signs of Labor Market Normalization Reflected in Wage Growth?
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 ...
Working Paper
Estimating Occupation- and Location-Specific Wages over the Life Cycle
In this paper we develop a novel method to project location-specific life-cycle wages for all occupations listed in the Occupational Outlook Handbook from the U.S. Bureau of Labor Statistics. Our method consists of two steps. In the first step, we use individual-level data from the Current Population Survey to estimate the average number of years of potential labor market experience that is associated with each percentile of the education-level specific wage distribution. In the second step, we map this estimated average years of experience to the wage-level percentiles reported in the ...
Working Paper
The Shift to Remote Work Lessens Wage-Growth Pressures
The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of US employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. This moderation offsets more than half the real-wage catchup effect that Blanchard (2022) highlights in his analysis of near-term inflation pressures. The amenity-values gains ...
Discussion Paper
Are Labor Shortages in Small Cities and Rural Areas Worse Than Urban Ones?
In the past, the Richmond Fed has reported about the difficulty of businesses finding workers with the right skills. In conversations with business leaders across the Fifth District, we have heard about labor availability challenges across all geographies: in large urban centers, small cities, and rural areas. This post examines how labor availability differs between small cities and rural areas versus large urban centers. We find that the COVID-19 pandemic made it harder for firms in small cities and rural areas to find workers compared to firms in urban areas. Perhaps because of the ...
Journal Article
Wage Growth, Labor Market Tightness, and Inflation: A Service Sector Analysis
This Economic Commentary explores the connections among labor market tightness, wage inflation, and price inflation at the service sector level. Across most service sectors, sector-specific labor market tightness and nominal wage growth have been above prepandemic averages since 2022. The data suggest that a stronger positive relationship between labor market tightness and wage growth has emerged in the aftermath of the pandemic. The relationship between sector-specific wage growth and inflation is more varied. In the education and health services sector, higher wage growth is associated with ...
Journal Article
Cost of Childcare Increasingly Weighs on Labor Force Engagement
Problems attaining childcare have weighed on workers’ engagement in the labor force for some time. Afew years ago, pandemic disruptions were the primary culprit in the lower consumption of childcareservices. Now, the rising cost of childcare may be to blame. As wage growth moderates, higher childcarecosts could place added pressure on households and cause some workers to at least partially disengagefrom the workforce.
Journal Article
Labor Shortages in the Healthcare Sector Have Eased, Which May Soften Price Pressures
Following severe labor shortages during the post-pandemic recovery, employment and wage growth in the healthcare sector have returned to their pre-pandemic trends. The healthcare sector is labor intensive, and inflation in the sector has historically tracked wage growth. Thus, lower wage growth may limit price pressures in the healthcare sector.