That could make today’s quick inflation last longer than policymakers expect.Īnd an update to that gauge on Friday showed that wages climbed 0.4 percent in October, which is roughly in line with recent monthly price increases. That would benefit workers.īut troubling outcomes are also possible, and high on the list of worries is what economists call a “wage-price spiral.” Employees could begin to demand higher pay because they need to keep up with a rising cost of living, and companies may pass those labor costs on to their customers, kicking off a vicious cycle. Wage growth could remain strong, driven by a tight labor market, and overall inflation could simmer down as supply chain snarls unravel and a surge in demand for goods eases. There are a few ways this moment could evolve. It is not yet clear which side of that equation - higher pay or higher prices - is going to win out, but the answer could matter enormously for the Federal Reserve and the White House. But those same people are shelling out more for furniture, food and many other goods and services these days. American workers are taking home bigger paychecks as employers pay up to attract and retain employees.

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