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Friday, June 06, 2014

The Myth of Wage-Led Inflation

Josh Bivins at the WSJ:

... Much recent discussion about potential price inflation seems to take as a given that it would be sparked by a pickup of wage growth. But looking at data from the non-financial corporate sector–which accounts for well more than half of all private-sector economic activity and for which rich data are available–what’s really striking about price growth since the end of the Great Recession is how much of it has been driven by rising profits, not rising labor costs. In fact, labor costs have been essentially flat between the end of the Great Recession and the first quarter of 2014. Profits earned per unit sold, on the other hand, have been rising at an average annual growth rate of nearly 9% since the recovery’s beginning. To the degree that there is any inflationary pressure in the U.S. economy over that time, it is surely not coming from labor costs. ...

    Posted by on Friday, June 6, 2014 at 05:13 AM in Economics, Inflation | Permalink  Comments (68)

          


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