Research Briefing | Dec 9, 2022

Introducing the Oxford Economics wage tracker

The Fed needs the labor market to cool quickly to put pressure on nominal wage growth or else their window for engineering a soft landing for the economy will close. The central bank likely wants to see nominal wage growth at 3.5%, a function of 2% inflation and 1.5% productivity growth. But to achieve that end, the Fed may need to push the economy into a mild recession.

What you will learn:

  • There is no perfect measure of nominal wages – each has its own blemishes. So, we’ve created a wage tracker that uses a statistical approach to identify the common signal being sent from several measures of nominal wages that we monitor closely.
  • Our nominal wage tracker was up 5.8% on a year-ago basis in Q3, weaker than the 6.3% in the prior three months but still well above that seen pre-pandemic. Under different unemployment rate scenarios, the joblessness rate would need to be between 5% and 6% to return nominal wage growth to 3.5%. The unemployment rate has never risen to that degree sans recession.
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