What you're not hearing about services inflation and the "over-tight" labor market

With oil prices rolled over and China re-opened, inflation concerns now focus on the supposedly extremely tight labor market leading to higher wages, which in turn will feed into persistent inflation in services. In fact, surprisingly, there is no relationship between low unemployment and higher compensation for labor. In turn there is also no relationship between labor compensation and services inflation. Inflation is a monetary phenomenon, and money supply growth has already sharply rolled over. We are already seeing the effects in falling core inflation. After another encouraging CPI report just before the September FOMC, we expect the rate hike will be no more than 25 bp.