Economist: Strong Labor Market Doesn't Worsen U.S. Inflation

Dean Baker, senior economist at the Center for Economic and Policy Research in Washington, D.C., insists a strong labor market has not worsened the US inflation rate, as the Fed had feared, and wages growing at a 4.1 percent annual rate over the last three months do not threaten the economy and is well below the peak rate of 6 percent at the start of 2022.

Photo Insert: The strongest wage growth is at the bottom of the wage ladder.

“Furthermore, the weakness in the hours data suggests that productivity growth will be strong in the fourth quarter, likely coming in at close to a 2 percent annual rate. Productivity data are erratic, so this crude calculation must be viewed with caution, but we seem to have recovered to at least a modest growth path after the declines in productivity reported for the first half of this year,” Baker argued in an analysis for Truthout.

Finally, Baker disclosed that the strongest wage growth is at the bottom of the wage ladder.

The annual rate of wage growth for production and nonsupervisory workers in the leisure and hospitality sector over the last three months was 7.8 percent. While most workers have seen wage growth that outstrips inflation this fall, real wage gains in this sector are far above the average.

Baker noted that high inflation rate comes when capitalists raise prices and invest left and right, borrow more and splurge in buying cheaper assets while paying handsome dividends that bloat the money supply. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

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