Study: Retiring Baby Boomers Are Holding Back Wage Growth

It’s a head-scratcher for many economists and a headache for Federal Reserve policy makers trying to decide if they should continue with gradual interest-rates increases.

Over the last 12 months, the U.S. economy has created more than 2 million new jobs, pushing unemployment down to 4.3 percent, yet average hourly earnings moved up just 2.5 percent. That’s helped hold down overall inflation, which has lingered below the Fed’s 2 percent target for nearly all of the past five years.

Fresh research from the San Francisco Fed provides an explanation: baby boomers. As they retire in droves, their exit from the workforce is distorting the data for average earnings, according to a blog post published Monday on the bank’s website.

“Wage growth isn’t as disappointing as it looks,” Mary Daly, director of economic research at the San Francisco Fed, said in an interview. “Wage growth, when cleaned up, looks consistent with



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