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Business Optimism Crashes (EP.307)

Animal Spirits Podcast

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The Effect of Interest Rates on the Labor Market

Average hourly earnings climbed 4.4% in the year through April that compared to 4.3% previous months and more than was expected. Powell says, you know, the labor market is still tight. But look at this chart. Wage growth in green has been lower than the consumer price index since since inflation took off in 2021. And now these two numbers are converging. Inflation is falling and wages are ticking back up a little bit. What's wrong with that? If let's say wages go above inflation, if that's possible, that hasn't happened yet in this whole time. Isn't that a good thing? Should we celebrating that?

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