Historically, inflation in the healthcare sector (blue line) has been tightly linked to wage growth for healthcare workers (green line). This relationship is not surprising as healthcare is labor intensive; according to the BEA, labor accounts for more than 80 percent of output in the healthcare sector. In recent years, however, PCE healthcare services inflation has been surprisingly subdued despite significant wage pressures. Nevertheless, as higher wages have tightened margins for healthcare service providers, PCE inflation for healthcare services is likely to increase.
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