Goldman Sachs Global Economics Analyst Exhibit 7: Our US Jobs-Workers Gap Measure of Excess Labor Demand Is Trending Down; Nominal Wage Growth Is Slowing Millions US Jobs-Workers Gap Millions Percent change Index 6 6 8 Employment Cost Index* (Left) 5 5 Average Hourly Earnings (Composition-Adj)** (Left) 70 7 Monthly Wage Surveys*** (Right) 4 4 60 6 3 3 5 50 2 Required by End-2023, GS Estimate 2 4 40 1 1 30 0 0 3 2 20 -1 -1 -2 -2 1 10 -3 Jobs-Workers Gap: JOLTS Job Openings -3 0 0 Jobs-Workers Gap: Alternative Job Openings -4 -4 -1 -10 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 2008 2010 2012 2014 2016 2018 2020 2022 *ECI wages and salaries private sector ex incentives (SA by Haver), qoq annual rate. **6m annual rate. ***Average of Dallas Fed manufacturing, Dallas Fed services, Richmond Fed manufacturing, . Values before the introduction of Richmond Fed services, NY Fed services (SA by GS), Kansas Fed services, and NFIB. Where available, we average current and expected wage changes for each survey the more recent surveys are backcasted statistically. Source: Haver Analytics, Linkup, Indeed, Goldman Sachs Global Investment Research The second reason why this cycle is different is that the recent normalization in supply chains and rental housing markets is a source of disinflation not seen in previous high-inflation episodes such as the 1970s, and it is only beginning to show up in the official numbers (Exhibit 8). On the goods side, the ongoing rotation from goods to services spending, healing supply chains, and rebounding inventory levels should put downward pressure on core goods prices. On the services side, asking rents on new leases have decelerated sharply after the one-time jump in rents related to the work from home-related increase in demand for space. The October CPI report suggests that the lagging measure of sequential monthly official CPI shelter inflation—which captures both new and continuing leases—has likely peaked too. Although year-on-year shelter inflation will likely rise through next spring as rents on continuing leases catch up to higher market rates, it is set to slow thereafter. 16 November 2022 7