Back Economics

Wage Tracker beginning to look a bit sticky

Published on March 13, 2024

Gerard MacDonell

I got my email from the Atlanta Fed around 3 PM, so I guess it was released sometime before then. What I take to be the main indicator, weighted to current population benchmarks, ticked down from 5.2% in January (where it had remained for six months) to 5.1% in February. The main indicator is published as the 3-month moving average of a surveyed 12-month rate. And I mention “sticky”, despite the decline, because this month the unsmoothed version of an analogous metric actually ticked up 20 basis. That points to stabilization, although we have to keep in mind that the underlying data are 12-month changes reported by individuals.

The chart below shows quarterly data for the ECI and for the Wage Tracker. To put these two series on the same panel, as at right, requires that I convert the Wage Tracker to a quarterly frequency. I do that by capturing the quarter end Wage Tracker for all periods, except the most recent, for which I pencil the February data in as “Q1.” You have to squint and accept some priors to see it, but there is some hint here that the annual change of the ECI might also be stabilizing.

A graph of employment and employment

Description automatically generated with medium confidence — *Source: Federal Reserve Banks of Atlanta and St. Louis (FRED), FH calculations*
*ECI and measures of core ECI are actual to December, recorded as Q4. The Wage Tracker is actual to February, recorded as Q1.*

Few others will have that interpretation. The more popular view will certainly be that wage growth continues to decelerate, predictably, as part of the general inflation renormalization. My 2 Stage Disinflation hypothesis, which is a possibility and not a certainty, implicitly rejects that tendency to extrapolate and asks you to instead focus on the current pace of inflation. The Wage Tracker has an upward bias, perhaps fairly stable, that reflects that its following of individuals means that it does not control for normal career advance at the individual level. Hence the use of a dual vertical scale in the right panel. But do you figure core ECI growth possibly stabilizing — or more likely getting stickier — just below 4.5% (implying AHC growth 50 bps higher over time) really is “normal?”

I concede it is an open question, and so should the doves. Not that I lean hawkish right here. That is a separate discussion.

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