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Economies around the world are in a bit of limbo right now. With record-high inflation, there’s essentially too much money circulating in the economy, meaning prices of everything from gas to food go up.
There are really two ways to deal with that problem. One is to raise interest rates, which plenty of central banks have been doing. The idea is that it reduces the money supply and cools down inflation. But, it also makes it harder for businesses to make money, which can lead to a recession.
The second option is to raise wages. This doesn’t solve the problem of inflation, but it makes it easier to cope with paying higher prices for everything.
Well, the US monthly job report for September just came out, and it turns out that wages are going up. On the one hand, the report shows that unemployment numbers went down. Plus, job openings declined sharply in August. But wages also grew 5% year over year in September, meaning that Americans have a little more money to pay for things. Though we don’t have the exact numbers for September’s inflation just yet, estimates have it just slightly over that 5% mark.
This is a big deal internationally, too. Because if the US is increasing wages, it could suggest inflation is not as under control as people think. That means the Fed will likely continue to raise interest rates to help slow down inflation as much as it can. Understandably, global markets aren’t the biggest fan of this approach – but they’re really having a hard time of it on every front lately.