Even in a Hot Economy, Wages Aren’t Keeping Up With Inflation - Jason Furman

April 12, 2022, Opinion: "The U.S. economy has been enjoying the fastest job growth in almost four decades. Unfortunately, inflation-adjusted wages are falling faster than they have in 40 years. Inflation ran 8.5% in the year ending last month, while nominal wages grew only 5.6%, a decline in inflation-adjusted wages of 2.7%. This presents a serious challenge to the “hot economy” thesis that tighter labor markets lead to rising real wages. This idea has never been as popular among academic economists as it is among Washington policy makers. A hot economy is surely better than a cold one, but the costs of an overheating economy might be larger than policy makers have appreciated."

HKS Faculty Author - Jason Furman