Wall Street economists insisted for months that the labor market couldn’t possibly get tighter without triggering wage inflation. “We are at full employment,” Deutsche Bank Securities headlined a note to clients in October. “Leading indicators of inflation flashing red,” it wrote days later. “On the cusp of full recovery,” Goldman Sachs wrote in December. “Wage inflation continues to gain traction,” JPMorgan Chase economists said in January.
Then came February, and Wall Street’s much-anticipated wage pressure was nowhere to be seen. Even though employers added a more-than-expected 227,000 workers in January, average hourly earnings rose just 0.1 percent. Forecasters struggled to make sense of why Americans’ pay had barely risen at all. “What happened with wages?” asked economists at Bank of America Merrill Lynch.
