A basic tenet of economics is that when demand for something goes up, so does its cost. So, many economists wonder why today’s high demand for workers hasn’t translated into bigger increases in pay.
Federal Reserve Chairman Jerome Powell has called this a puzzle that defies a single or easy explanation. It isn’t just, for example, that productivity has slowed, making it harder for businesses to justify paying more — though that is certainly a factor.
At 4 percent, unemployment has been very low. Businesses report having a hard time finding available workers. And some economists say that should add up to wage growth rates of about 3.5 percent. Instead, wages are increasing at a 2.7 percent annual rate. (On Friday, the Labor Department releases its July employment report with the latest wage growth data.)
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