What The Wage Data Is Telling Us

To summarize, when we finally get a recession caused by real factors, not a demand shortfall, we can see how different it is from normal recessions.  That should make us even more confident that most normal recessions are basically monetary problems.  (During my life, the 1974 recession was the one with the largest “real” component—prior to Covid-19.)

One other point.  Although I often advocate NGDP targeting, in some models nominal wage targeting does even better.  If money were too tight then wage growth would be falling, and vice versa. In my view, the stability of nominal wage growth suggests that monetary policy has been roughly on target during this period.

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