One of the few good developments for the economy since the pandemic is being threatened as wage growth for American workers starts to decline. However, that might be a good thing for the country’s workforce.
The government announced on Wednesday that June’s inflation spiked by 9.1 percent, the highest 12-month increase since November 1981. All prices increased, but not as a result of income increases, which have recently bottomed off.
That concerns because if prices and wages continue to rise in tandem, the Federal Reserve—which is already under great pressure to control inflation—might be obliged to act quickly to raise interest rates, which would result in job losses and send the economy into a harsh recession. Instead, slower wage growth might contribute to reduced prices and less pain for the typical worker.
Dean Baker, a senior economist at the liberal Center for Economic and Policy Research, warned that the Fed must apply the brakes if there is a spiralling wage-price relationship. “If wage growth is slowing, which it obviously is, you can’t have that.”
This relieves the Fed of a tremendous amount of strain, according to Baker.
For present, that provides little solace to the millions of Americans who are finding less and less money in their pockets after paying their bills each month. The pattern has fueled national pessimism, which might fuel concerns about an approaching economic downturn and ruin Democrats’ chances of winning in November.
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