FloorGLI

This article is intended to serve as a follow-up to the #FloorGLI proposal in “Floor It! Fixing the Fed’s Framework With Paychecks, Not Prices.” The official national accounts estimate of gross labor income (GLI) is based on the Quarterly Census of Employment and Wages (QCEW), but because of sharp

Retail sales showed strength in January. As a proxy for gross labor income trends, it confirms both (1) the resilience we're seeing in the labor market and (2) the amplified role of residual seasonality (December understates growth, January overstates/rebounds). Real-time data-watching was already complicated enough due to

Summary: Today's FOMC Statement and press conference shows high continuity with the thinking reflected in the December FOMC meeting. The Fed does not appear to be impressed by the deceleration in wage growth in 2022H2 enough to explicitly rethink the inflation, unemployment, or interest rate outlook right now.

Wage growth slowed in Q4 faster than consensus forecasts–-at an annualized rate just over 4%. We already noted in our preview that this would be very consistent with what the other Q4 macroeconomic & wage data was signaling. The scenario poised to trigger a hawkish overreaction did not materialize.

As we await the Q4 Employment Cost Index (ECI) release tomorrow (forecasting consensus: 1.2% QoQ, 4.9% CAGR; Q3: 1.2% QoQ, 4.8% CAGR), two key points to keep in mind. 1. The Q4 Data Showed Slowing Across Many Wage and Wage-Relevant Indicators, Potentially To 4.2% annualized.

The Fed is arguing that inflation is driven by the cost-push impacts of wage growth on service prices. This is a traditional view, but the pandemic recovery has been anything but textbook. In our view, the primary nexus is a demand-pull relationship. The core question for the Fed ought to

What to Expect: 1. The Fed will step down from their breakneck pace of 75 basis point hikes to a still very brisk 50 basis point pace of hikes. 2. FOMC members are likely to signal that the peak Fed Funds Rate will be above 5%, likely in the target

Summary 1. Friday's Q3 ECI release showed a modest slowdown in the pace of wage growth. Coupled with what we already knew about Q3 employment growth, we are continuing to see a slower—though still highly respectable and resilient—pace of gross labor income growth (~6.1% annualized

As of the first quarter of 2022, we have effectively recovered the jobs and wages lost to the pandemic-induced recession.