BlackRock Investment Institute

Macro insights

Apr 18, 2022

U.S. wages: room to grow

This chart shows that U.S. private sector wages grew by 5% in 2021, the fastest pace of gains since the 1980s.

Sources: BlackRock Investment Institute, with data from Haver Analytics, April 2022. Notes: The
chart shows year-on-year growth in private sector nominal wages and salaries from the Employment
Cost Index (ECI) quarterly release. Latest data are for Q4 2021.

Private sector wages grew by 5% in the U.S. in 2021. This marked the fastest pace of gains since the 1980s, as the chart shows. Employers could fund higher wages by increasing prices, in turn causing workers to demand further pay rises – and so the loop goes on. In other words, is this the start of a wage-price spiral? We don’t think so.

Macro dashboard Macro dashboard

An economy adjusting

It has proven difficult to entice workers back to work as pandemic restrictions lifted, especially to services jobs that require a lot of contact with people. Wages have gone up to persuade them. This is unusual, given that many people have not yet returned to the workforce. These are not wage pressures typical of a normal business cycle: they’re helping the economy adjust to a labor shortage.

Moreover, research shows that workers are 4.5% more productive now than before the pandemic. Greater productivity negates the need for price increases. And when you consider currently high inflation, there is still more room for individual wages to rise before they catch up with existing price increases.

Recent macro insights

Manufacturers to slow production
Manufacturers have slowed production substantially in both the U.S. and the euro area, according to survey data.
Read more Read more
Financial conditions tightening fast
U.S. financial conditions have tightened a lot since the start of the year – in other words, financing is becoming more costly for individuals and companies. Since then, th...
Read more Read more
Less optimism on growth
Economic growth forecasts for this year and the next are coming down rapidly. The OECD last week followed the World Bank in downgrading growth forecasts.
Read more Read more
Elga Bartsch
Elga Bartsch
Head of Macro Research
Read bio
Nicholas Fawcett
Nicholas Fawcett
Macro Research

Stay ahead of markets with the latest insights from the BlackRock Investment Institute

Please try again
First Name *
Please enter a valid first name
Last Name *
Please enter a valid last name
Email *
Please enter a valid email
Investor type *
This field is mandatory
Location *
This field is mandatory
Company *
This field is mandatory
*Required information | Read our Privacy policy
Thank you
Thank you for your subscription!
We usually publish weekly insights on every Monday. Expect to receive your first newsletter from us this upcoming Monday.