Jeffrey Lacker Says Real Wages are Going Up. Is He Right?

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Binyamin Applebaum asks inflation hawk Jeffrey Lacker why inflation hasn’t risen if labor markets are tight, as he believes:

….There’s this confusion about real and nominal that I think infects the discussion, particularly of wages and slack. Real wages have accelerated over the last year because inflation has fallen and the rate of gain in nominal wages hasn’t changed much. The wage pressures we’ve been hearing about, they show up in the macro data as real wage pressures.

And the historical evidence suggests that there’s some lag before things accelerate as you reduce slack significantly. In 1966-67, we had unemployment at 5 percent, we pushed it to 4, and it was 1967 and 1968 when inflation took off. So there was a significant lag in the way that relationship seems to have worked in the past.

That got me curious: have real wages risen over the past couple of years? My preferred measure is production and nonsupervisory wages, and it looks like Lacker is right. Compared to CPI, the general trend is upward. It doesn’t look to me like it’s accelerating, but it does seem to be going up.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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