Salient to Investors:

The FRB of San Francisco says:

  • Normal wage models do not apply during and after recessions. In the last 3 US recessions, wages held steady or did not decline by very much, despite spikes in unemployment, during the downturns, and then as the economy recovered and unemployment fell, wages did not recover much either.
  • Companies find it easier to lay off workers than to lower wages when facing declining output, but fail to lower labor costs as much as they want during the downturn, so they continue the adjustment after the recovery takes hold by keeping a lid on wages.
  • The severity of the last recession means that the damping effects on wages will continue for some time.

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Real Wages Still Below June 2009 Level