Inflation & Wages To Duke It Out In 2023

Believe it. In the midst of an acute labor shortage & rising wages, worker pay fell behind inflation in December from a year earlier at a 1.7% clip following a 2.1% decline in 2021. So, most households worse off. Still & again …

The WSJ’s analysis of the year end government labor stats does suggest that as “inflation recedes” from its high of 9.1% earlier in 2022 (it’s now about 7%), a “shift may be underway” with those real wages turning from the red to the black column. Surely, the supply-chain disruptions helping to cause the historically high inflation all but cancelling historical wage gains are now fading. That’s partly due to the pandemic being largely behind us and that we’ve learned to better manage higher energy costs linked to Russian-Ukraine War. The big caveat: “Whether those reversal trends continue in 2023 depends on the path of the economy, which is [simultaneously] cooling as the Federal Reserve [continues to] raise interest rates and faces the risk of a recession.”

“The question for 2023,” opined Nela Richardson, chief economist at ADP, a payroll processor, “is which moderates faster: inflation or wages.” No kidding. Anyone with a crystal ball? What’s this about Netflix offering a paycheck of “up to” $385,000 for a flight attendant willing to work on its private jet as Microsoft is laying off 10K? BTW, US Labor Bureau stats says the median flight attendant earned about $61K in 2021.

Davd Soul