Following a disappointing jobs report on Friday, which showed the sluggish pace of wage growth continue, Federal Reserve Chairman Jerome Powell stuck with the script he has been following since taking on the role in February.
“We will continue to aim for 2% inflation and for a sustained economic expansion with a strong labor market,” he was quoted by Bloomberg as saying in his first speech as chairman. “As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals,” he told the The Economic Club of Chicago.
“The absence of a sharper acceleration in wages suggests that the labor market is not excessively tight,” Powell said. “I will be looking for an additional pickup in wage growth as the labor market strengthens further.”
As the wage growth trend continues to defy the Federal Reserve’s preferred Phillips Curve model, it’s worth looking at one of the reasons why. Older workers accept lower pay and their share of labor force is rising: