Wage growth expectations rise to a 50-year high

Wells Fargo Research Team Wells Fargo

Summary

The probability of high wage growth for next year was 49% in Q4-2021, as competition for workers and rising living costs continued to put upward pressure on wages. In data going back to 1968, this marks the highest likelihood to date. The probability of high wage growth has remained elevated for more than four years, but the pandemic-induced decline in labor supply and the battle against rising inflation led to a sharp increase last year. Although a large increase in the Employment Compensation Index has spooked some fears of a wage-price spiral, structural differences in the economy today and tightening monetary policy should hold off a 1970s-like scenario.

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Wells Fargo Research Team

Wells Fargo

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