What do various wage measures tell us about underlying wage growth?
Year: 2025
Type: article
Abstract: We develop a novel indicator of aggregate and sectoral wage inflation by leveraging multiple sources of wage data with detailed sectoral information, using a hierarchical dynamic factor model. Our empirical approach controls for data-specific measurement errors and industry-specific developments; this feature makes it particularly effective in assessing wage inflation during the Covid era, which saw increased dispersion in wage inflation across industries and larger divergences between measures of the level and trajectory of wage inflation. Our findings indicate that as the labor market has cooled, aggregate underlying wage inflation has returned to pre-pandemic levels, with wage growth in some sectors even falling below its pre-pandemic rate.
Source: FEDS Notes
Authors: Hie Joo Ahn, Lucas Moyon, Daniel Villar
Institutions: Federal Reserve, Federal Reserve Board of Governors
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4406259869