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How Should the Fed Interpret Slow Wage Growth?, No. 15-02

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How Should the Fed Interpret Slow Wage Growth?, No. 15-02

DATE: February 2015

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ABSTRACT: During the current recovery, policymakers have debated whether slow wage growth indicates labor market "slack" that is not adequately reflected in the unemployment rate alone. The relationship—or lack thereof—between the unemployment rate and wage growth has challenged macroeconomists for decades. Empirical studies using micro data find that individual wages are procyclical, but attempting to use aggregate measures of wage growth to determine the level of "slack" in the labor market would be highly difficult and potentially misleading.

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Kudlyak, Marianna , Lubik, Thomas A. , Rhodes, Karl and Federal Reserve Bank of Richmond. "How Should the Fed Interpret Slow Wage Growth?, No. 15-02," Economic Brief (February 2015). https://fraser.stlouisfed.org/title/6034/item/583933, accessed on May 17, 2022.

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