The 2023 recession could be avoided if wage growth slows – USA TODAY

Inflation Outpacing Wage Growth For tens of millions of Americans, wages are not rising as fast as prices, meaning it is essential to tighten belts over the long term whenever possible.  National inflation for all goods and services rose by more than 9%.  Average wages are rising by a figure closer to 5%.  READ ALSO: Record inflation drives up prices for these 40 household items

Strong wage growth is normally a good thing for workers and a boon to the economy.

Utilities? Not so much.

Average wage increases are approaching their highest level in decades, fueling inflation, the Federal Reserve says. And that could force Fed officials to hike rates even further next year, threatening to push the US into a mild recession.

Economists say moderating wage growth is key to avoiding a recession.

But maybe it’s not that simple.

What is the average wage increase in 2022?

Average annual wage increases fell from 5.7% at the start of the year to 5.2% in the third quarter, according to the Labor Department’s Employment Cost Index. But that’s still well above the average of 3.3% before the pandemic and about 2% in the decade before the health crisis.

Robust pay increases are usually a good thing. However, since the COVID crisis, they have not kept pace with inflation, meaning consumers are losing purchasing power.

But the spike in wage growth contributes to inflation, as employers with high labor costs typically raise prices to keep up profits.

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Meanwhile, the Federal Reserve has hiked interest rates sharply to lower annual inflation, which reached 9.1% in June and fell to a still high 7.1% in December.

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