Employers are also hurt, lamenting labor shortages, as millions of workers — fueled by the debate over ‘essential work’ during the pandemic and buoyed by austerity — are experiencing a degree of bargaining power they haven’t had in decades.

That has led to a tense, politically charged dynamic in which wage pressures are a growing complaint among companies large and small as they try to maintain their profit margins, even though wage increases have generally not kept pace with price increases.

“We’re learning a lot about how structurally fragile our economy is,” said Claudia Sahm, a former Federal Reserve economist. She cited a reliance on “endless low-paid workers and just-in-time deliveries of goods” to keep consumer prices low for years.

The employment cost index, which tracks wages and benefits, rose the most in the first quarter of this year, according to Labor Department figures released last week. Still, a recent analysis by the Economic Policy Institute, a left-wing think tank in Washington, concluded that about 54 percent of the total price increase in the non-financial corporate sector since the second quarter of 2020 can be attributed to an increase in profit margins, while the labor costs accounted for less than 8 percent of price increases. The analysis indicates that 38 percent of the increase comes from non-labour costs, such as overhead, fuel or raw materials.

That data complicates the increasingly popular story that spikes in worker wages tend to drive the severity of price increases, rather than a broader mix of reasons.

“You would normally expect earnings to fall during a period of high inflation,” said Tony Roth, the chief investment officer of Wilmington Trust Investment Advisors, a branch of M&T Bank. The reason the opposite has happened for many companies in recent years, he said, is simply, “Companies do it because they can get away with it.”

The economy, while strong, can be stuck in an irritating, self-reinforcing cycle for a while: The ongoing surge in household spending has often signaled businesses that they had room to raise prices without consequences – allowing executives to hire more workers while retaining them. of profitability.

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