Two summers ago, we posted an article, “Is the Economy Getting Better Or Worse?” Still perplexed, this year, we’re hearing from the Kansas City Fed. They strike a cautionary note that if 14.3% of workers haven’t received a raise in the last year, then there aren’t true pressures on wages, and therefore no concerns about inflation, and no need to raise interest rates. QED.

Not so fast.  Let us return to the thought process that geometry proofs taught us:

If 14.3% of workers did not receive a wage increase, 85.7% did. Drop to the median, not of the triangle, but of the same Fed statistics. The median wage increase in April was 3.3% and the 75th percentile increase of 13.9%.  That delta is 10.6%

So the real question is: Who are the 14.3%? Are they people in jobs that the market no longer rewards? Are they people who have been making at market, or higher, for many years and therefore their employers cannot justify an increase? Are they employees who have not acquired new skills and therefore are stagnated in roles and cannot get a raise? Do they work for companies that are facing economic challenges and doing their best to keep their doors open in the US? Or are keeping wages low but providing benefits?

We, of course, do not have the answers to the questions underlying the 14.3%, but we feel that the focus should be on the reciprocal, the 85.7% … and especially the 13.9%.  Where they live and what they do – the intersections of those planes will have far more to do with inflation. Read More Here.