The improvement in US wages growth stalls
Wages growth has slowed a lot from its COVID peak, but the improvement looks to have broadly stalled recently.
US wages growth has fallen steadily from its COVID peak, but that improvement has stalled recently based on the Fed's preferred employment cost index (ECI).
The headline ECI - which is the best available "pure" measure of wages that excludes the effect of changes in the composition of the workforce - picked up in Q1, increasing by 1.2% after a 0.9% rise in Q4, which was outside the range of market expectations.
On CCI's seasonal adjustment, the improvement in the private-sector ECI excluding incentives, where wages are the most important cost for most services companies, looks to have broadly stalled.
This series rose by 1.1% in Q1 after a 1% rise in each of Q3 and Q4, with the estimated trend in annualised wages growth holding steady at about 4% in Q1, after having fallen from a peak of about 5¾% in 2022.
By way of comparison, annualised growth was averaging about 3% prior to the pandemic.
The strength in wages growth at this point of the business cycle brings home that the US labour market remains tight, with the unemployment rate of about 3¾% still below the FOMC's estimated NAIRU of just over 4%.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy, contributing to the investment decisions of the firm. Kieran has long experience as a macroeconomist in both the private and public sectors. He has worked most recently as Chief Markets Economist for National Australia Bank and was previously Chief Economist, Australia and New Zealand, for Barclays Bank and ABN Amro Bank/RBS. Kieran also worked as Principal Adviser on the macroeconomy and budget policy in the Commonwealth Treasury and Director of Forecasting.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
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