Wage Growth - Inflation - Wage Growth
Macro Perspectives: Mon 02 Apr 22
We ended the week, and opened a new month and quarter, with the jobs report.
Not surprisingly, the data on Friday morning showed a very hot labor market, and hot economy;
Unemployment is 3.6% -Â just a tenth of a percentage point away from pre-pandemic levels, which were 50-year lows.
The economy added 431k jobs - that number will be revised higher by this time next month, as it has for eleven consecutive months. In fact, last year the labor department undershot the final payroll number, every single month, by an average of 158k jobs.
Bottom line: While unemployment is near record levels, the job growth every month is running just about as hot as it was last year, during the biggest "back to work" phase.
What about wage growth?
Year-over-year wage growth was 5.6%. That's a big number, and a big deal. For much of the decade that followed the depths of the post-financial crisis, wage growth was stagnant, below 3%.
Guess who wanted 3%+ wage growth as a driver for inflation, to assist in escaping the burdensome and dangerous deflationary forces?
The Fed.
Now they have wage growth (a lot of it), and (still) 11 million unfilled jobs, with employees in a position of strength to continue commanding higher wages - they have every incentive to do so, as the cost of living has outpaced their wage gains.
Again, what does the Fed tell us wage growth does? It feeds into inflation. This is known as a feedback loop. More wage growth > more inflation > more wage growth…
This should haunt the Fed.
MARKETING INTERRUPTION
After much thought and discussion, I am launching the Gryning Portfolio - if you like what you’ve been reading in my Macro Perspectives, you’ll love the Gryning Portfolio.
Quantitative models are used to extensively analyse about 400 systematic assets & 850 single stocks (from the U.S. & Europe 600) - to ascertain which asset classes and sectors are crowded and to what degree they may develop contagion risks.
Subscribe and for less than the price of a coffee a day (pre current inflation levels) you’ll get;
Clear, unbiased views on global markets, economics and the world - and how it impacts your financial future.
Sophisticated investment idea’s delivered in a plain English, easy-to-understand format.
Buy when I buy, sell when I sell.
nb: the portfolio will be active for Monday 4th April 2022.