by Jeffrey P. Snider
Basic economics has proven that when the supply of something dwindles, absent an offsetting drop in demand the price should rise. When translating these fundamental terms to the labor market especially of the past few years, the supply means “slack” or the available pool of workers not yet working; demand has been, we are told repeatedly, very robust; therefore the price of labor, the hourly wage rate, should be rising and rapidly so if only to match the rhetoric (“best jobs market in decades”).
Monetary policy is already at a great disadvantage because its core philosophy seeks to discourage rapid growth in wages. Figuring that wage inflation leads to actual inflation, central banks believe they must act to control it even though, as noted above, it’s basic economics that shows and truly delivers the best basic economy.