Wage Growth and Inflation Signal

Wage growth and inflation composite: assessing labour-cost pressures and price dynamics.

As of 2026-01-24

Gemini Summary

Signal Summary:

  • The Wage Growth and Inflation Composite signal indicates a NEUTRAL regime for inflation pressure (1). Current wage growth for private and civilian workers stands at 3.6% and 3.5% year-over-year, respectively, reflecting stable conditions (1). Conviction Band: Medium, Interpretation Confidence: High Confidence, Internal Conflict Flag: No.

Key Dynamics:

  • The latest Wage Pressure z-score is -0.357684, firmly within the NEUTRAL band of -1.0 to +1.0, reflecting a moderation from earlier 'COOL' readings (1).
  • Labor Market Tightness z-score is currently 0.000000, suggesting balanced conditions in the labor market (1).
  • The combined Inflation Composite z-score is -0.178842, also well within the NEUTRAL regime threshold of -0.75 to +0.75, showing stability (1).
  • Conditional Invalidation: A sustained shift in the Inflation Composite z-score above +0.75 (HOT) or below -0.75 (COOL) would reverse the current neutral interpretation (1).

Scenario Balance:

  • Base Case dominant: Continued neutral wage growth and inflation pressure, supported by current z-scores near zero (1).
  • Upside secondary: A re-acceleration in either private or civilian wage growth (e.g., above 4%), or a notable tightening in the labor market, could shift the composite towards a 'HOT' regime.
  • Downside residual: A sustained deceleration of wage growth below 3% could push the composite into a 'COOL' (disinflationary) regime.

Time Horizon & Aggregation:

  • Time Horizon: Cyclical (months), given the reliance on quarterly ECI data up-sampled to monthly and a 3-month exponential moving average smoothing (1).
  • Aggregation Weight Hint: High, as this composite provides a fundamental, coherent assessment of underlying wage and labor market driven inflation pressures.

Macro Relevance:

  • Macro dimension informed: Pricing and Slack (1).
  • Cycle position: Mid-cycle, consistent with stable, non-extreme inflation and labor market conditions.
  • Typical interaction with other macro signals: This signal is a critical input to US inflation and labor market themes and often influences Federal Reserve policy outlooks and bond market expectations.

Data & References:

  • Private Industry Wages & Salaries, 12-month % change (CIU2020000000000A), latest available monthly up-sample reflects 3.6%.
  • Civilian Workers Wages & Salaries, 12-month % change (CIU1020000000000A), latest available monthly up-sample reflects 3.5%.
  • Labor Market Tightness z-score (derived from JOLTS data), latest 0.000000.
  • Additional public datasets that would improve depth or reliability: Policy-Relevant Inflation (PCE) Signal (2), CPI vs PPI Divergence Signal (3).

Wage Growth and Inflation Composite Chart

Signal chart

Composite of wage growth and inflation indicators.

Wage Growth and Inflation Composite Table▸

Sector Theme

series_id private_wage_yoy civilian_wage_yoy private_wage_z civilian_wage_z Wage_Pressure_z Wage_Pressure_0_100 Wage_Pressure_Smoothed Wage_Regime
4.1 4.2 -0.642372 -0.634815 -0.638593 33.333333 -0.641517 NEUTRAL
4.1 4.2 -0.607042 -0.674491 -0.640766 33.333333 -0.641141 NEUTRAL
3.8 3.9 -0.944287 -1.180359 -1.062323 33.333333 -0.851732 COOL (disinflationary)
3.8 3.9 -0.944287 -1.180359 -1.062323 33.333333 -0.957028 COOL (disinflationary)
3.8 3.9 -0.770847 -1.011736 -0.891291 33.333333 -0.924159 NEUTRAL
3.7 3.8 -0.735808 -1.011736 -0.873772 33.333333 -0.898966 NEUTRAL
3.7 3.8 -0.735808 -1.011736 -0.873772 33.333333 -0.886369 NEUTRAL
3.7 3.8 -0.735808 -0.927425 -0.831616 33.333333 -0.858993 NEUTRAL
3.4 3.5 -1.055725 -1.269630 -1.162677 33.333333 -1.010835 COOL (disinflationary)
3.4 3.5 -1.011736 -1.199095 -1.105415 33.333333 -1.058125 COOL (disinflationary)
3.4 3.5 -0.899321 -1.011736 -0.955529 33.333333 -1.006827 NEUTRAL
3.5 3.6 -0.674491 -0.735808 -0.705149 33.333333 -0.855988 NEUTRAL
3.5 3.6 -0.674491 -0.735808 -0.705149 33.333333 -0.780569 NEUTRAL
3.5 3.6 -0.505868 -0.551856 -0.528862 33.333333 -0.654715 NEUTRAL
3.6 3.5 -0.224830 -0.490539 -0.357684 33.333333 -0.506200 NEUTRAL

Theme Continuous

Wage_Pressure_z Labor_Tightness_z Inflation_Composite_z Inflation_Composite_0_100 Inflation_Composite_Smoothed Inflation_Regime
-0.891291 -1.037678 -0.964485 42.857142 -0.886343 NEUTRAL
-0.873772 -0.622607 -0.748189 42.857142 -0.817266 NEUTRAL
-0.873772 -0.770847 -0.822309 42.857142 -0.819788 NEUTRAL
-0.831616 -0.719457 -0.775537 42.857142 -0.797662 NEUTRAL
-1.162677 -0.481779 -0.822228 42.857142 -0.809945 NEUTRAL
-1.105415 -0.385423 -0.745419 42.857142 -0.777682 NEUTRAL
-0.955529 0.000000 -0.477764 42.857142 -0.627723 NEUTRAL
-0.705149 -0.449661 -0.577405 42.857142 -0.602564 NEUTRAL
-0.705149 -0.112415 -0.408782 42.857142 -0.505673 NEUTRAL
-0.528862 -0.224830 -0.376846 42.857142 -0.441260 NEUTRAL
-0.357684 -0.224830 -0.291257 42.857142 -0.366259 NEUTRAL
-0.357684 -0.449661 -0.403672 42.857142 -0.384966 NEUTRAL
-0.357684 -0.122635 -0.240160 42.857142 -0.312563 NEUTRAL
-0.357684 -0.599547 -0.478616 42.857142 -0.395589 NEUTRAL
-0.357684 0.000000 -0.178842 42.857142 -0.287216 NEUTRAL
Methodology: Wage Growth and Inflation Signal