Could US wages and prices skyrocket?

As prices for products such as gas, steaks, bacon and camping gear soar rapidly, eating into paychecks and grabbing headlines, consumers ...

As prices for products such as gas, steaks, bacon and camping gear soar rapidly, eating into paychecks and grabbing headlines, consumers are more likely to take notice and ask a better salary.

“Things change completely when inflation is a big number,” Mr. Blanchard said. “The salience changes.”

There are signs that wages are contributing to higher prices, at the margin. Prices have recently started to rise sharply for basic services, a set of purchases outside of health care, rent and transport for which wages tend to be a major cost of production.

“It was concerning,” said Alan Detmeister, an economist at UBS who previously led the Fed’s wages and prices section. But, he added, this is hardly conclusive.

More anecdotally, stories of workers getting big pay rises in a tight labor market abound.

While wages in less-skilled areas like leisure and hospitality have been rising rapidly for months, professional pay may also be on the verge of a recovery: Banks did big base pay raises, and Amazon will increase its max base corporate and tech worker pay to $350,000 from $160,000 as it competes for a limited pool of highly skilled employees.

Amazon, which has also raised wages for warehouse workers, raised prices partly in response.

“With the continued expansion of Prime member benefits and the increase in member usage we’ve seen, as well as rising wages and transportation costs, Amazon will increase the price of our Prime membership in the United States. United,” Brian T. Olsavsky, the company’s chief financial officer, said during a Call for results February 3. The monthly price goes from $12.99 to $14.99 and the annual subscription goes from $119 to $139.

“This is our first price increase since 2018,” Olsavsky noted.

Other companies are raising wages but said they are covering rising costs by improving efficiency. It’s the kind of sweet spot the White House and the Fed are hoping for, because it could allow workers to earn more without relentlessly putting pressure on prices.

“We anticipate during our annual review process that we will have a nominally higher salary increase for our associates,” said Kevin Hourican, president and CEO of food retailer Sysco. Call for results on February 8. “And we have productivity improvement efforts that can help offset those kinds of increases.”

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Newsrust - US Top News: Could US wages and prices skyrocket?
Could US wages and prices skyrocket?
Newsrust - US Top News
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