On average, however, labour markets across the rich world are clearly getting tighter. America’s is plainly overheating.In March average hourly earnings were 5.6% higher than a year earlier, on the headline measure. Another gauge suggests that the lowest-paid are seeing bigger rises.Goldman Sachs, a bank, produces a wage tracker that corrects for various pandemic-related distortions. It is more than 5% higher than a year ago, the fastest rate of increase since the data began in the 1980s.Almost all wage measures in America show unusually rapid growth (by comparison, manufacturing wages rose by an annual average of 4.1% in 1960-2019).Before the pandemic, underlying French wage growth was in the region of 1-2% a year. Now it is close to 3%. Italy looks similar.On March 23rd Norway’s central bank noted that “wage inflation has been higher than projected, and wage expectations have risen.” Britain is particularly striking.On Goldman’s measure, underlying pay there is rising at an annual rate of about 5%. Surveys of businesses suggest that even faster growth over the coming year cannot be ruled out.Across the g10 large economies as a whole wages are rising by at least 4% a year.Is this sustainable? To most people wage growth of 4% hardly sounds malign. But the arithmetic is inescapable.
