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NewsFlash: February 21, 2007

Inflation and Labor Costs

New reports of rising labor costs have some worried that employers might pass these costs to consumers in the form of higher prices, leading to faster inflation and possibly prompting the Federal Reserve to raise interest rates. But today’s EPI Snapshot  shows those worries are largely unfounded.

EPI senior economist Jared Bernstein  shows how since 1995, trends in unit labor costs – a closely watched index of compensation that rose at a fast annual rate of over 6% in the fourth quarter of 2006 – and inflation have been essentially unrelated.

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