U.S. demographics and the wage-less recovery

This Friday's employment figures will be the last key labor data ahead of the September FOMC meeting. The aboveconsensus forecast for a 0.4% m/m gain would put the yoy growth rate at 2.2%, an uptick from the July reading, but well within the recent ranges. The overall characterization of sluggish wage growth is therefore unlikely to change. 

Among the many explanations for the wage-less recovery is demographics. The thesis is that as retiring workers are replaced with younger/less experienced/less expensive employees, aggregate wage growth is held down. Some support for this phenomenon was found in the data. However, that the same phenomenon may also be weighing on productivity growth. This means that unit labor costs may be an even more accurate gauge of inflationary pressures than in the past. ULC growth has averaged at 2% over the past three years (with productivity growth near zero), which may explain the relative stability of core inflation despite the apparent lack of wage pressures and global disinflationary headwinds