Hatzius Sees Little Pent-Up U.S. Wage Deflation Yellen Cited

There is little evidence that the U.S. is in the midst of a wage dynamic that Federal Reserve Chair Janet Yellen highlighted last week as a possible reason behind the slow increase in earnings, said Jan Hatzius, chief economist at Goldman Sachs Group Inc. in New York.

The thesis, dubbed “pent-up wage deflation” by researchers at the San Francisco Fed, holds that wages didn’t fall enough during the past recession because employers refrained from cutting pay in order to maintain employee morale. As a result, management now may not have to offer increases to attract workers as the job market improves, according to San Francisco Fed economists Mary Daly and Bart Hobijn.