A new explanation for nominal wage rigidity is proposed when firms, as distinct from representative agents, can index wages. In general, the probability of contractionary monetary and real shocks, either alone or simultaneously, can make any degree of indexation optimal. If restricted to plausible values, then non-indexation is optimal and increases firm’s expected profit at the expense of workers. With non-indexation, real shocks always produce equilibrium and monetary shocks produce disequilibrium, corresponding to the NBER business cycle concept with involuntary unemployment and a negative relationship between unemployment and job vacancies. However, this disequilibrium is not “temporary” and suggests new policy.