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Goldman economists analyzing wage gains with high inflation


According to an interview, Goldman Sachs’ chief economist said it would be challenging to sustain wage growth of 5% to 6% without causing “meaningfully high” inflation.

The comments come as Analysts expect the Federal Reserve to raise rates. Many economists believe it is time to raise rates to prevent inflation from getting out of hand.

On Tuesday, Jan Hatzius told CNBC that wage increases need to slow down. In the meantime, inflation grows and becomes a central focus for the Fed and markets.

Hatzius added that in his opinion, 4% is acceptable. He explained that 5% to 6% seem challenging to sustain without higher inflation.

Hatzius said that the quarter-on-quarter annualized growth rate of wages went above 4%. Hatzius is also Goldman Sachs’ head of global investment research.

He told CNBC’s “Squawk Box Asia” that the current pace of wage gains probably needs to slow.

Overall, the average pays for workers in the United States rose significantly in the year ahead. In early January, the Labor Department reported that it is increasing by nearly 4% in annual terms to almost $31 an hour. Pay for workers in the private sector rose even faster, rising by 4.7% in a single year. The federal minimum wage, currently $7.25 an hour, will increase to $15 an hour over three years starting in 2022.

Earlier this month, David Solomon (Goldman Sachs CEO) said wage inflation is everywhere. Wage costs at Goldman jumped 33% to $17.8 billion. Executives said a whopping $4.5 billion increase fueled mainly by pay increases for good performance.

The Labor Department said on Friday that consumer prices in the U.S. increased 7% in December. It advanced from a year earlier, the fastest rate since June 1982. That increase followed a 5.8% increase in November, the largest since a 7.6% increase in June 1982.




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