‘One of the most important charts about the economy this century’ — and what it means for market volatility

‘The modern equivalent of Bread and Circuses to sate the masses’

To those pinning the recent spikes in stock-market volatility on inflation and, specifically, higher wages, Barry Ritholtz of Ritholtz Wealth Management wants you to take a close look at this chart:

As Ritholtz points out, the two big outliers to the upside are health care and college. On the flip side, clothes, cars, TVs and technology, in general, showed disinflation or outright deflation in prices.

“Wages have barely ticked over the median inflation measure,” he said, “but that did not stop some people from blaming the correction on rising wages.”

Ritholtz says “we are a long ways” from the wage push inflation of the 1990s, although he does expect wages to tick higher, just not enough for the Federal Reserve to take any drastic action.

“Reading the pundits, I cannot tell which fate awaits us: the robot-driven apocalypse where we are all out of work, or the inevitable spike in wages that sends rates much higher and kills the market,” he wrote in a blog post. “Perhaps both — higher wages sends employers into the waiting arms of our automated future.”

Mark Perry, econ professor at the University of Michigan and the man behind the Carpe Diem blog, created the chart and posted it on Twitter, where it was hailed as “stunning” and “one of the most important charts about the economy this century.”