Wages Are Not an Important Driver of US Inflation, San Francisco Fed Study Finds

[usonian]

https://archive.ph/Mqqkg

The recent run-up in the employment cost index, a measure of wages favored among economists and policymakers, “explains only about 0.1 percentage point” of the three percentage-point increase in consumer price inflation excluding food and energy, San Francisco Fed economist Adam Shapiro said in an article published Tuesday on the bank’s website.

“This leaves open other explanations for the high correlation between labor-cost growth and inflation. For instance, recent evidence shows that wage growth tends to follow inflation, as well as expectations of future inflation,” Shapiro wrote.

“Overall, the results highlight that recent labor-cost growth is likely to be a poor gauge of risks to the inflation outlook.”

Another study which shows profits driving inflation:
How Much Have Record Corporate Profits Contributed to Recent Inflation?
https://democraticunderground.com/100217884522

[progree]

1. How can wages be driving inflation if they are lagging inflation?

Considered the most reliable gauge of wages and salaries:
Source: https://fredblog.stlouisfed.org/2018/02/are-wages-increasing-or-decreasing


So real wages and salaries have finally turned up, slightly, in the last 2 quarters. But the last reading is still 3.7% below the peak, and 3.4% below the Q1.2021 value, when inflation began a consistent rise from the low inflation era of at least a decade.