A wage-price spiral would trigger reductions in the work force

Central bank officials around the world have said taming inflation is their top priority, but rising prices have turned out to be stickier than originally expected.

The U.S. economy saw a pickup in inflation that  amid pandemic-induced supply chain issues. But the current inflation story seems to be more about services than demand constraints.

contributed to pushing wages and prices higher. Some workers have seen big pay increases . This led to  as people job hopped for more money and the  sharply.  

“Typically in inflationary periods, wages don’t keep up, and it’s the price of goods that are going up more than the cost of labor,” said Laura Veldkamp, Cooperman professor of finance and economics at Columbia Business School. “But this is an unusual episode where it seems like right now the main driver of inflation is actually labor costs, and what that means actually is that workers are gaining.”

But there are  is cooling, especially as layoffs have skyrocketed nearly fivefold in 2023 .

″[Employers] may increase their base salaries to say, ‘please stay,’” Lori Wisper, managing director at Willis Towers Watson, told CNBC. “The only way to correct for overpaying on base salary is reductions in force… And part of that reduction is layoffs.”