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Photo: Chris Ratcliffe/Bloomberg via Getty Images

Wages are surging as labor shortages give workers leverage to ask for more money. One big company sees this news as an opportunity to jack up prices.

Why it matters: A raise in your pay doesn’t mean much if there’s a commensurate increase in the prices of goods and services — your spending power will be unchanged.

Driving the news: Michael McGarry, the CEO of paint and coatings giant PPG Industries, told Bloomberg that his customers can’t argue with the higher prices his company is charging them.

  • Raw material costs are going up — PPG is exposed to rising oil prices — and customers have a greater capacity to pay.
  • "This work-from-home phenomenon is going to lead to additional wage inflation because people are going to have the opportunities to figure out where they want to work," he added.

What they’re saying: "Why will consumers pay more? Because they can afford it," SGH Macro Advisors economist Tim Duy writes in a note to clients.

  • Duy says that inflation measures like CPI should be considered in the context of other key variables.
  • "The main event is the dynamic between expectations, inflation, and wages," he writes. "One part of that dynamic is firms believing the consumers no longer have a choice but to absorb price increases."

What to watch: Duy says to keep an eye on this dynamic as it, among other things, may complicate the Federal Reserve's efforts to stimulate employment while maintaining price stability.

Go deeper

Oct 15, 2021 - Podcasts

Inflation: A cause for concern?

Inflation: A cause for concern? The global energy crisis is becoming a bigger problem for the economy. The Consumer Price Index — the best way to measure inflation in the U.S. — jumped 5.4 percent compared to last year in September, according to new data released this week. How is the Federal Reserve and the Biden administration reacting to this latest news?

Axios Re:Cap talks with Axios’ chief financial correspondent Felix Salmon who’s been reporting on the latest news.

1 hour ago - World

Biden's ambassador nominee: "China is not an Olympian power"

Nick Burns testifying before the Senate Foreign Relations Committee. Photo: Sarah Silbiger/Bloomberg via Getty Images

President Biden's nominee to serve as ambassador to China delivered a stark assessment of the challenges the U.S. faces in confronting Beijing, but stressed that the rising superpower is "not all-powerful" and the West retains "substantial" advantages.

The big picture: Nicholas Burns, a retired career diplomat and former U.S. ambassador to NATO, used his confirmation hearing Wednesday to echo the growing bipartisan consensus that China poses "the greatest threat to the security of our country and the democratic world" in the 21st century.

Scoop: U.S. and Israel to form team to solve consulate dispute

Secretary of State Antony Blinken (left) and Israeli Foreign Minister Yair Lapid (right) meet in Washington. Photo: Andrew Harnik/Pool/AFP via Getty Images

The U.S. and Israel are planning to form a joint team to hold discreet negotiations on the reopening of the U.S. Consulate in Jerusalem, Israeli officials say.

Why it matters: The consulate handled relations with the Palestinians for 25 years before being shut down by then President Donald Trump in 2019. Senior officials in Israeli Prime Minister Naftali Bennett's government see the consulate issue as a political hot potato that could destabilize their unwieldy coalition.