1.8 Real wage pressures will persist as the US labor market quickly returns to 2.1 tightness, necessitating a strategic response by firms to protect margins US post-COVID cycle returning to tightness in record time… …necessitates planning for persistent 14% wage pressures 0 2. n o i s r Post-COVID expansion e 12% (starting 2020) on verge of While hiring difficulties will likely ease, 1 V 202 r e the labor market will not return to the b turning “tight” o t easy condition that lasted for most of c 25 O 10% ed t the previous cycle—it will remain tight a 1 d Post-GFC expansion (starting 2009) p e u t es v took ~90 months to turn tight i a 8% t r ec t p s Wage growth will put cyclical pressure er en P e v i m t y on margins—firms forced to absorb or u ec o 6% x l E p offset with greater productivity growth G C B . ed em v n 4% er es U r s Passing through to consumers not t h g i r l possible for every company, all the time— l A . p 2% u Level of unemployment at which labor o risk of loss of market share r G g market is considered tight (u*) n i t l u s n o C 0% n o Tight cycles, when labor is less available, t s 1 13 25 37 49 61 73 85 97 109 121 o B tend to spur capital investment and lift y b 1 2 Months into expansion 0 productivity growth cyclically 2 © t h g i r y 1. Dark green curve shows global financial crisis of 2008/2009 p o Note: u* at Mar 2017 12 C Source: NBER, BLS, CBO, BCG