The trade data for the fourth quarter thus far indicate that the deficit will
almost certainly widen, thereby subtracting from growth. In short, anyone who
expects that we will see more quarters with 5.0 percent growth is not paying
attention to the data.
Despite considerable improvement in the labor market, growth in wages continues to be disappointing. One reason is that many firms were unable to reduce wages during the recession, and they must now work off a stockpile of pent-up wage cuts. This pattern is evident nationwide and explains the variation in wage growth across industries. Industries that were least able to cut wages during the downturn and therefore accrued the most pent-up cuts have experienced relatively slower wage growth during the recovery.