October, 2022 -- Rising wages keeping pressure on inflation

Wages climbed at a rapid pace in 2022 through September as employers kept looking for workers to meet consumer demand. The hot labor market that could keep pressure on the Federal Reserve as it contemplates how much and how quickly to cool down the economy. The central bank is trying to make money more expensive to borrow and slow consumption and eventually hiring, tempering wage and price growth. Friday's employment report could bolster the case for at least one half-point increase. Wages have picked up by 5.6 percent over the past year, the report showed, a far quicker pace than the 2 to 3 percent annual pay gains that were typical during the 2010s. At the same time, the jobless rate remained at 3.8 percent in September while there was a slight increase in the labor participation rate and overall employment levels were up. Unemployment continues at just slightly above the half-century lows it had reached before the pandemic.

A. Draw a market for labor in 2022, labeling initial supply and demand as S1 and D1, and wages and employment as w1 and N1.

B. Cite a phrase from the article that speaks to a change in demand for labor.

C. Cite a phrase from the article that speaks to a change in supply of labor.

D. Return to the market in 5A and make changes to the market consistent with information in the article and your answers in 5B and 5C.

E. Set out the formula for determining the unemployment rate.

F. Consistent with the formula for determining the unemployment rate and information in the article, explain whether the number of unemployed persons has increased, decreased, or stayed the same.