Jason Furman makes a really good point in this thread. You can argue that there's more slack in the labor market than the unemployment rate indicates, which could explain weak wage growth; but by any measure there's less slack than 2 years ago; wages still going nowhere 1/
Taking a somewhat longer view, wage growth has been pretty flat since early into the recovery; it was surprisingly high when unemployment was very high, is now surprisingly low. It looks like a slope puzzle, not a level puzzle 2/
Some say that the whole notion of a relationship between labor market slack and inflation is wrong. But that's not a sustainable argument logically, and is refuted by extreme cases like southern Europe 3/ nytimes.com/2018/03/27/opi…
I keep coming back to the idea that the Phillips curve gets flat when you're at very low inflation, so downward nominal wage rigidity kicks in; and maybe inhibits wage increases too 4/ nytimes.com/2018/05/04/opi…
But we really do need to think this through. Adding epicycles to the pre-crisis Phillips curve model is getting ever less tenable 5/
