Key points
- Wage growth can feed into inflation (wage-price spiral).
- Tight labor markets drive wage increases.
- Real wages adjust for inflation.
Example
When wages grow 5% and productivity gains 1%, unit labor costs rise about 4%, pressuring margins and potentially inflation.
In history
Average Hourly Earnings growth peaked near 6% year-over-year in early 2022, then eased toward 4% by late 2023 as labor demand cooled.
Related terms