Overlooked in last week’s employment report

Karim writes:

Average hourly earnings reached a new all-time low on a y/y basis of 1.5%.
One of the strongest historical arguments as to why deflation is unlikely is downward nominal wage rigidity.
i.e., its easier to negotiate wage growth from say 4% to 3%, then 1% to 0%, or certainly a wage cut.
But, high unemployment and high duration of unemployment will test that theory.
A move much lower from here will stoke the fears of those Fed members worried about deflation.
Of course the flip side is that this is quite likely a positive for corporate profits.


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