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Hourly Wage Growth and the Economy

Real hourly wage growth may fall in the coming months and years as inflation returns to a more normal level.

Roland Czerniawski: In this week's chart, we analyze hourly wage growth and some of its implications to the broader economy. The chart depicts nominal hourly wage growth and the inflation rate, represented here by the Consumer Price Index since 2010.

Real hourly wage growth is the widely followed headline number, but here we are breaking it down into its two underlying components. What really stands out is that nominal hourly wages, the green line, have been growing at a steady 2% rate for many years now, and the growth rate has recently accelerated just slightly to about 2.2%. What made a huge difference in the real hourly wage growth, however, was the collapse of the inflation rate, the gray line, that began in late 2014, driven by lower oil and gasoline prices.

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