A friend asked a question: “Our advanced economies are 70 – 80 % Services based these days; so will this make CPI inflation difficult to sustain if wages growth is not sustained.”
The answer is YES. Inflation is unlikely to be sustained if wages growth declines.
BUT wages growth is accelerating, not declining, both in the services sector and in the broader economy.
Wages growth is also not likely to decline while we have record job openings; 5.4 million in the services sector alone.
Employers are having to offer higher wages and sign-on bonuses to attract workers — the result of record high savings levels fueled by government stimulus.
