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Tight Labor Markets Drive Up Wages; Inflation Keeps Lid on Growth: Fed

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© Reuters

By Yasin Ebrahim

Investing.com – Tight labor markets fueled robust wage growth nationwide at a time when supply chain issues continued to keep the pace of inflation elevated, according to the Federal Reserve’s Beige Book released Wednesday.

“Economic activity across the United States expanded at a modest pace in the final weeks of 2021 … [but] growth continued to be constrained by ongoing supply chain disruptions and labor shortages,” the Fed said in its Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through Jan. 3.

Robust wage growth, meanwhile continued to add to inflation pressure, driven by tightness in labor markets, according to the report. “[M]any contacts noted that wage gains among low-skill workers were particularly strong, and compensation growth remained well above historical averages.”

In the wake of the elevated pace of inflation, which is now running at its fastest pace since 1982, businesses have been able to pass costs onto consumers but the pace of price hikes had waned, the Fed said.

The impact of the Omicron variant, meanwhile was also front and center, with “most districts noted a sudden pull back in leisure travel, hotel occupancy and patronage at restaurants as the number of new cases rose in recent weeks,” according to the report.

Tight Labor Markets Drive Up Wages; Inflation Keeps Lid on Growth: Fed

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