“We think pace of convergence back to Fed’s 2% PCE target will be slow – labor market still exerting downward pressure on price inflation. The underlying trend calculated from the three primary measures of hourly wages—average hourly earnings, the employment cost index, and compensation per hour—is still only growing 2%. Going forward, we expect only a modest acceleration to perhaps 2.5%. Meanwhile, we expect productivity growth to reaccelerate to 1.5%-2%. Together, these numbers imply unit labor cost growth of 0.5%-1%, which would be slightly below the rate of price inflation of 1%-1.5%.” (Goldman Sachs)


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