Texas Firms Expect to Raise Wages This Year at 2x the Fed’s Inflation Forecast | by Honest Austin | May, 2021

Businesses revise their expectations for wage and price growth in 2021.

Honest Austin

Texas business executives expect to hike wages this year at an annual rate of 4.7%, outpacing official forecasts for inflation this year and pointing to price pressures ahead.

Compared to just a few months ago, inflation and wage expectations have risen among surveyed business executives. The Texas Business Outlook Survey in December showed an average forecast of 4.3% for wage growth, before jumping to 4.7% in April.

Texas executives expect input prices to rise even faster this year, by a rate of 5.5%. In the same survey in December, they forecast an increase of only 3.7%.

Thats according to 376 executives surveyed by the Federal Reserve Bank of Dallas.

Growth expectations for selling prices, a closer proxy for consumer prices, rose to 4.3% in April, compared to a forecast of 3.4% four months earlier.

“Amid surging optimism and waning uncertainty, businesses upwardly revised their expectations for wage and price growth in 2021,” said Dallas Fed economist Anil Kumar and research analyst Judy Teng in a research note today.

“Increased economic activity has led to concerns about hiring. Nearly two-thirds of businesses trying to hire workers reported a lack of applicants as an impediment, with nearly half of those citing generous unemployment benefits as an obstacle.”