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I’m agnostic on this question. But I do have strong views on a related issue—wage inflation is the only inflation that matters. The Fed needs to get wage inflation down close to 3%. Are they doing so? I’m not sure. The FRED data site says average hourly earnings are up 4% over the past 12 months and are rising at an annual rate of only 3.4% over the past three months. That’s almost consistent with 2% trend inflation.

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But the Atlanta Fed wage tracker says hourly earnings are up between 5.2% and 5.4% over the past three months, depending on whether you use a weighted or unweighted series. So which is correct?

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I don’t know which series is more accurate. But I can say that if the FRED series is correct then the Fed has probably won its battle, and if the Atlanta Fed series is correct then we are in for a tumultuous 2024. What do you think?

PS. Yes, wages are a lagging indicator. But the early indications are that NGDP growth will remain strong in Q4.

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