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Steady growth in the US isn't feeding into wages

Helen Cahill
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Some activity softened due to the election (Source: Getty)

The US economy grew steadily in the lead up to the presidential election, the Federal Reserve has said.

In its Beige Book - a report based on anecdotal evidence from business - the Fed said gains in wages and prices had been modest, however, and the strong dollar was acting as a burden to manufacturers.

In October and November, there was a tightening of labour market conditions in seven out of 12 of the Fed's districts, it said.

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"As in the past four Beige Books, wage growth was characterised generally as modest, on balance, by district councils," the US central bank said.

The lack of wage growth has been a problem for the Fed as it looks to increase interest rates. The US labour market is near full employment, but economists have not seen that feed through into higher wages and higher inflation.

The policymakers of the US central bank have been trying to lay the foundations for a rate hike this year, having held off previously due to economic uncertainty.

Uncertainty over the outcome of the election had caused some softening of activity in some districts, such as vehicle sales in St. Louis and Richmond districts. Hiring cooled in Cleveland, the Fed said.

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