Introducing the Oxford Economics wage tracker

The Fed needs the labor market to cool quickly to put pressure on nominal wage growth or else their window for engineering a soft landing for the economy will close. The central bank likely wants to see nominal wage growth at 3.5%, a function of 2% inflation and 1.5% productivity growth. But to achieve that end, the Fed may need to push the economy into a mild recession.

What you will learn:

• There is no perfect measure of nominal wages – each has its own blemishes. So, we’ve created a wage tracker that uses a statistical approach to identify the common signal being sent from several measures of nominal wages that we monitor closely.
• Our nominal wage tracker was up 5.8% on a year-ago basis in Q3, weaker than the 6.3% in the prior three months but still well above that seen pre-pandemic. Under different unemployment rate scenarios, the joblessness rate would need to be between 5% and 6% to return nominal wage growth to 3.5%. The unemployment rate has never risen to that degree sans recession.