Inflation

One argument that the labor market is to blame for high inflation has been the significant rise in unit labor costs during the post-pandemic recovery. The most recent example comes from the ECB:

Welcome to our State Space series. Here you will find how we’re thinking about the pathways and scenarios that could take us to critical economic states. We will never settle for "it's too unlikely." We try to reason backwards from the most important (tail-risk) scenarios,

Throughout the pandemic recovery, high inflation has been attributed to tight labor markets and high wage growth. Fed officials have, for months, maintained that the labor market needs to soften in order to bring down inflation. Commentators have pointed to high wage growth as a source of cost-push inflation: My

Core-Cast is our nowcasting model to track the Fed's preferred inflation gauges before and through their release date. The heatmaps below give a comprehensive view of how inflation components and themes are performing relative to what transpires when inflation is running at 2%. Most of the Personal Consumption