Wage woes

Generations of economics students have been brought up on the concept of the non-accelerating inflation rate of unemployment (Nairu) – the idea that if unemployment drops below a particular level, wage and price inflation will accelerate. From this perspective, next week’s labour market data will look very odd. They are likely to show that wage inflation has levelled off, at 3.5 per cent, even though the unemployment rate is a mere 3.8 per cent, its lowest rate for 45 years. And consumer price index inflation, at 1.9 per cent, has actually fallen a lot since unemployment peaked in 2011.

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