Why are workers feeling so hard-pressed — when wage growth is outpacing rapidly falling inflation — that they are willing to risk the consequences, given the comparatively weak American labour laws?
Inflation in the US has fallen faster than many had originally thought possible — and even more unexpectedly, this was achieved without sending the economy into recession or causing higher unemployment. Inflation has fallen from the peak of 9.1% y-o-y from June 2022 to 3.4% in the latest December 2023 Consumer Price Index (CPI) report. Meanwhile, US economic growth rose to 2.5% last year, faster than the 1.9% in 2022. The job market remains robust with the unemployment rate hovering near the lowest levels in decades, at only 3.7%. Some have coined this relatively painless drop in CPI “immaculate disinflation”. We have dis-cussed some of the reasons for this (including government largesse and excess savings as well as low fixed-rate borrowing costs during the Covid-19 pandemic) in previous articles.
Against this backdrop of disinflation, wage growth — on the back of the resilient economy and tight job market — has been outstripping inflation. In other words, real wage growth is positive, and has been since May 2023. And yet, over the past year, we have seen an uptick in strikes across the US, including several large-scale, high-profile ones involving auto workers, Hollywood actors and writers, pilots and healthcare workers. There has also been a discernible increase in union organisations.
