SITUATIONAL STATUS

If an economy is at full employment and enjoys stable inflation, wage growth will equal labor productivity growth plus inflation (LPG+I). If wages exceed LPG+I, unemployment is too low and inflationary pressure will build. If the opposite is true, there’s labor market slack and inflationary pressures will weaken. Wage growth is now 3.8%, and LPG+I is 4.6%, signaling modest excess labor supply even though the unemployment rate is just 4.4%.