While we wait on the Fed's next moves on inflation, we take a look at the data about wages and spending feeding those decisions.

Plus, the books that help feed us. From American Public Media, this is Marketplace.

In Washington, D.C., I'm Kimberly Adams and F.R.K.A.R.R.D. All. It's Tuesday, January 31st. Good to have you with us.

We got the Labor Department's latest employment cost index this morning. That's the quarterly report on how much employers are paying their employees.

Wages rose 1% in the fourth quarter, which is less than they rose in the third quarter and in the second quarter.

This report lands just as the Federal Reserve is meeting to decide how much it should raise interest rates in the ongoing attempt to reduce inflation.

Marketplace's Justin Ho gets us started.

The Federal Reserve has been worried that wages have been rising too quickly.

The idea is that rapid wage growth will feed into higher inflation, basically becomes something with self-sustaining process.

That's Tim Dewey, an economics professor at the University of Oregon. He says as wage growth slows down, the Fed might not feel the need to keep hiking interest rates as much as it has been.

If you have another quarter like this, I think the Fed will take more hope that they have interest rates in the right place to really restore what they would say price stability or two times.

More interest rate hikes run the risk of raising unemployment and pushing the economy into a recession since Preston Moe, senior economist with the advocacy group employee America.

What we're seeing is that it's possible to bring down wage growth even without increasing unemployment.

Moe says even though the unemployment rate is still low, the right people are quitting their jobs has fallen. So is the hiring rate.

It's probably the case that people are moving less to other jobs and that slow down manifests through slower wage growth without higher unemployment.

Slower wage growth on its own isn't great for workers, but Elise Gould, senior economist at the Economic Policy Institute, says inflation has also been slowing down at a faster rate.

When that happens, then real wages rise, and that's what we want to be shooting for.

Gould says the workers who've benefited the most from wage gains have been low income workers and historically marginalized groups.

We want that to continue. We don't want there to be an unnecessary recession. That's going to disproportionately hurt black and Hispanic workers, young workers, workers with a high school degree.

Gould says that's another reason why the Federal Reserve should avoid raising rates too much this year. I'm Justin Howe from Marketplace.

On Wall Street today, ending the first month of 2023 on an up-note. We'll have the details when we do the numbers.

Staying on the topic of what Jay Powell and company might do tomorrow and the data they're looking at, Justin talked about the employment cost index, and last week we got the Fed's preferred inflation measure, the Personal Consumption Expanditure's Price Index.

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