Given that changes in wages have become more closely linked to the level of corporate performance, the pace of increase in wages has been slower among nonmanufacturing than among manufacturing firms, reflecting their lower profits. In order to maintain competitiveness in the severe market environment, firms have continued to restrain labor costs.
For example, our latest projections assume that household expenditure will grow more slowly as the economy grows out of the early 1998 recession than it did as we grew out of the recession of 1991/92. We made that assumption because people now carry a great deal more debt, relative to their incomes, than was the case a decade ago.