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Wage inflation unusually weak in the recovery - Goldman Sachs

FXStreet (Łódź) - The Goldman Sachs team of analysts point out that wage inflation has been in the center of policymakers' and market attention as an gauge of the state of the economy.

Key quotes

"Nominal wage inflation since the Global Financial Crisis (GFC) has been unusually weak relative to its historical relationship with price inflation."

"This is especially true for the US and the UK."

"We demonstrate that wage inflation historically – especially over a more recent sample – has been a more precise and robust indicator of labour market slack than price inflation."

"This validates, to a certain extent, the increased weight placed on wage inflation recently by policy makers and investors."

"Despite the tighter link between unemployment and wages, we find that wage inflation outcomes in the US, the UK and the Euro area have been subdued."

"This supports the notion of greater slack in the economy relative to other measures of strengthening activity."

"Moreover, to achieve sustainable gains in wage inflation, alongside continued gains in employment, would require improvements in post-crisis labour productivity."

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