Labor-cost pressures appear to be easing in the sectors of the economy, including healthcare, that the Federal Reserve is most concerned about regarding inflation, The Wall Street Journal reported Feb. 8.
Prices for services other than housing, which also excludes goods, food and energy, have been dubbed by some economists as "supercore," to distinguish the measure from core inflation, which only excludes food and energy, the report said. Fed Chair Jerome Powell recently said he is evaluating inflation pressures by focusing on this "supercore" inflation.
In December, annual supercore inflation was running at about 4 percent, according to the personal-consumption expenditures price index, the inflation measure the Fed prefers to the consumer-price index, the report said. That rate is below the 5 percent overall economic inflation but still twice the Fed’s 2 percent target.
Mr. Powell has said wages are the main driver of supercore inflation, because labor is usually those services' biggest cost.
Economists with the White House Council of Economic Advisers built a measure tracking only wages that go into supercore prices, the report said. It weights wages according to a sector’s contribution to services not including housing, which account for about a third of GDP. Hospitals, doctors’ offices and nursing homes therefore carry a particularly high weight.
By that gauge, supercore wage growth for nonmanagement workers eased sharply from 8 percent in March to 5.2 percent in January.
That abatement heavily outpaces the drop in wage growth for all private sector workers and for all nonmanagement workers in the same period, the report said. Those groups saw wage growth fall from 5.9 to 4.4 percent, and from 7 to 5.1 percent, respectively.
The drop is even more abrupt when looking at shorter periods, the report said. Supercore wages were swelling at 9.7 percent, annualized, in the three months ending in October 2021. That had slowed to 4 percent by January, below that for all private sector workers at 4.6 percent, and private production workers at 4.4 percent, in the same period.