Fed Board, Report: The Role of Wages in Trend Inflation, Back to the 1980s? 

“The results show that wages inform estimates of trend inflation. The weight on wages was highest around 1980, drifted down through the 2000s, and returned to its average value from 1976 to 1985 by 2022. This pattern is reminiscent of the pattern in concerns over wage developments in inflation discussions, as the possibility of a wage-price spiral was palpable in the 1970s and 1980s but less salient in the 1990s and 2000s. The increase in the weight on wages in recent years suggests value in greater focus on wage developments in inflation assessments, although the statistical model herein does not speak to potential causal mechanisms. Finally, the return of a substantial role for wages coincides with an increase in the role of trend (persistent) inflation shocks in inflation dynamics in the 2020s, although the magnitude of this increase is smaller in a model with wages than in the univariate model. The results from models of this type can complement other approaches to assessing the persistence of recent high inflation.”