Economics
How Surge in Inflation-Adjusted Pay Can Lead Fed to Higher Rates
- Cooling prices are giving Americans more purchasing power
- Fed may raise rates again if wage growth ignites investment
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One reason to look past the surprise December drop in U.S. retail sales came in a report a day earlier, which showed Americans’ inflation-adjusted wages rising at the fastest pace in more than two years.
In fact, when excluding food and energy prices, growth in U.S. average hourly earnings outpaced so-called core inflation by 1.3 percentage point in the 12 months through January, matching the strongest performance in eight years. Take out housing costs and inflation-adjusted wage growth was 2 percent -- matching the highest since 2009.