Fed Losing Control, Unruly Wage, Price Data Screams

A closely watched measure of worker compensation rose more than expected in the second quarter, while a key gauge of core prices came in hotter than forecast. Taken together, the data underscored the urgency of the Fed's inflation fight, which escalated this week when policymakers delivered a second consecutive jumbo-sized rate hike. The employment cost index, which Jerome Powell cited late last year during a dramatized retelling of the moment he changed his mind about the proper course of pol

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7 thoughts on “Fed Losing Control, Unruly Wage, Price Data Screams

  1. It’s hard to blame any employee who gets a 5% raise in a 9% broad inflationary environment.
    To be clear: Employers are the ones giving raises and creating the “wage price spiral”.
    Most companies only provide raises annually so, just like rent, there will be a rolling set of data each quarter as employees and employers all try to stay competitive in the hiring market.
    Of course too, wage gains are often uneven: those with the most bargaining power usually need a raise the least.

    My takeaway is that the Fed blew an opportunity by not doing 100 bps: the psychology of the stock market is clearly ready for a dovish pivot and Inflation’s still a huge problem so missing any chance/efficiency is an unforced error.

  2. The fed can’t control inflation alone, fiscal spending and policy / regulatory / geo-political matter as well.

    Consumer facing employees gave employers the middle finger for getting paid, too little, while taking serious medical risks – of course there is going to be raise price increases.

    Some of the work force, switched to YOL-ing because the regulatory frame work didn’t place the proper regulatory rails on options or the token market, and allowed full on manipulation.

    Putin and MBS realized how much economic power they have, to weaponize portions of the market.

    This is not only a FED problem!!!

    1. All of those are excellent points in support of the “Fed never had control” hypothesis. Some during a decade-plus binge of QE, it seems they lost control and we are only noticing now that disinflationary trends have abated. (Or so that scary hypothesis goes.)

  3. US Congress just approved a 4.6% pay increase into 2023 for the US military. While well below current inflation, this annual increase is ~67% more than the average annual pay increase for the prior five years.

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