San Francisco Fed researchers: wage growth is not a key factor driving up inflation. According to a new analysis released by the San Francisco Federal Reserve, rapid wage growth is not an important factor driving inflation. Adam Shapiro, an economist at the San Francisco Fed, wrote on the bank's website on Tuesday that only 0.1 percent of the 3 percent rise in core inflation was related to the recent rise in the employment cost index. This opens up other explanations for the high correlation between labour cost growth and inflation. Recent evidence, for example, suggests that wage growth tends to follow inflation and expectations of future inflation. Overall, the findings suggest that recent increases in labour costs may not be a good measure of the risks to the inflation outlook. It is found that there is only a weak conductivity between the employment cost index and the price change of non-residential services.