Wages have risen sharply since 2002 as inflation continued to heat up

Inflation remained strong and wage growth was boosted by the end of 2021, setting the stage for a challenging fiscal year in which price gains will be contained as the Federal Reserve and the White House try to keep pace with the job market.

The central bank’s preferred inflation rate per capita consumption index was 5.8 per cent in December, up from 5.7 per cent in the previous month. It surpassed the previous month to become the fastest growing after 1982.

Inflation is reduced somewhat on a monthly basis, but its more annual measurements come at a time when wages are rising rapidly. While strong wage growth is good news for workers, it also increases the risk of prolonged high inflation: companies may raise prices to offset rising labor costs.

The employment spending index, a measure of federal pay and benefits, rose 1 percent in the final quarter of 2021 over the previous year. Although it was lower than the 1.2 percent of economists predicted in the Bloomberg survey, it closed a strong annual increase: The Cage Rose 4 percent In the year to the fourth quarter, its wages and salaries increased by 4.5 percent.

This marked a rapid increase in overall compensation and both wages and salaries since the data series began two decades ago.

By making inflation a political responsibility for the Biden administration and the Democrats in the midterm election year, price gains are eroding consumer confidence despite rising wages. While having the White House Taken Steps The central bank is primarily tasked with reducing the need to bring prices under control, with the aim of easing pressure on constrained supply chains.

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The central bank’s policymakers have signaled at their March meeting that they will begin raising interest rates as they try to prevent today’s rapid rise in prices from becoming a permanent feature of the economic landscape. Markets are anxiously watching the central bank’s next steps, trying to quantify how much it will raise rates and how fast it will be. Higher borrowing costs can slow economic growth and lower stock prices and take away some of the buoyancy from US expansion.

Economists expect inflation to fade this year, although complex supply chains make it difficult to calculate when it will happen. The world trade system is under pressure to be pronounced based on a variety of actions – including one Made by the Federal Reserve Bank of New York This includes backlog, delivery time and inventory.

As people buy more goods inflation rises, again and again government relief checks and other federal concessions help. The world’s factories and shipping lanes are struggling to keep up with demand, resulting in higher prices for cars, lumber and clothing.

Rents have recently begun to rise, which is a sign that price gains are expanding and will last longer than economists expected. Rising food and gas prices may provide less insight into the future, no matter how much prices are rising in those categories, but they also make it a painful moment for families.

As inflationary uncertainty persists and another wave of the virus is prevented from returning to normal life, many measures of consumer confidence show that people are less optimistic. The University of Michigan study The sentiment has stumbled as prices have risen, and Code of Convention Board Reduced in January.

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“You have very high inflation, so people are seeing an erosion of their purchasing power,” said Dana M., chief economist at the conference board. Peterson said the recurring virus was also the cause. “People will have more confidence once they cross Omigran.”

Federal Reserve officials and Wall Street economists expect price gains to disappear this year, but it is unclear how much or how soon they will do so. The central bank forecasts 2.6 percent inflation at the end of the year, according to the December meeting, but central bank chairman Jerome H. Powell said the situation had worsened slightly this week.

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“We are concerned about the risks of sustainable real wage growth rather than productivity causing upward pressure on inflation,” he said. Powell Said during a press conference On Wednesday.

Mr. Powell cited an earlier reading of the Employment Expenditure Index in particular – which was higher in the third quarter – which is one reason why the central bank has decided to move from inflation to a state where it is ready to fight back from stimulating growth.

The fact that the move did not rise sharply in the final quarter of the year will give investors hope that the Federal Open Market Committee, the central bank’s policy-making body, will not accelerate its plans to revive the economy. Help.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote following the publication: “It is reasonable to assume that wage growth is unlikely to accelerate dramatically again, as labor participation has increased in recent months and demand levels have fallen.” “Meanwhile, this report facilitates immediate pressure on the FOMC to act aggressively.”

Omair Sharif, founder of Inflation Insights, wrote in a follow-up study that the recession in financial services incentives was a moderate drive for private workers’ pay and pay rises.

“Meanwhile, inflation continued to hammer wage growth,” he wrote, noting that inflation had consumed most wages in sectors including education and manufacturing.

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