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**JUNE 3, 2022**
Kuttner on TAP
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**Latest Jobs Report Shames the Inflation Hawks**
Wage growth continues to decelerate. Contrary to Larry Summers et al.,
wages are not driving price increases.
The Labor Department reported today
that job creation
increased by 390,000 in May, down slightly from 406,000 in April and
dramatically below the blistering monthly average of 561,000 for the
previous year. Total jobs in the economy are still half a percentage
point below their pre-pandemic level.
Wage growth also continued to slow down, as labor markets are not tight
enough to command higher real wages. In May, wages grew at an annualized
rate of only 3.8 percent, or
**less than half the rate of inflation**. That's down from 4.3 percent
in the previous quarter.
Both the labor force participation rate, at 62.3 percent, and the ratio
of employment to population, at 60.1 percent, remained 1.1 percentage
points below their pre-pandemic February 2020 levels.
How can wages be driving inflation if wage increases are far below price
increases? Yet in an extended interview with
**The Washington Post** Tuesday, Larry Summers
literally called for higher unemployment based on spurious data and
logic. He said: "I don't see how we can get inflation to substantially
decelerate without wage inflation falling substantially, and I don't
see any reason to think wage inflation will fall substantially unless
there's a substantial loosening in labor markets, which would mean
higher unemployment."
So workers are getting whacked on both ends. Their actual wages are
lagging far behind prices, but they are getting blamed for inflation.
For more detail including charts, see this excellent post from EPI
.
If you look at the sources of price increases in the economy, such as
higher retail gas prices, or rent hikes, or higher food costs at grocery
stores, or higher ocean shipping charges, the lack of wage pressure as
the culprit is only common sense. It's not as if filling station
attendants or grocery clerks or container-ship crews are getting big
raises.
The ills driving inflation are elsewhere-the supply chain mess,
corporate concentration that leads to monopoly price-gouging, and excess
profits in industries such as ocean shipping and airlines taking
advantage of scarcity. The usual suspects who blame workers' wages are
conspicuously silent on the windfall gains of Wall Street billionaires,
for whom the pandemic was a bonanza.
It has been decades since workers got wage increases commensurate with
productivity growth. The fact that earnings for some low-wage service
workers, in routine and often hazardous occupations, actually rose
during the pandemic is cause for celebration, not concern.
~ ROBERT KUTTNER
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