US wages growth picks up over the past few months
The resilience of wages growth likely reinforces the Fed's concern that it may take longer for core inflation to return to the 2% target.
Ahead of the 25-26 July FOMC meeting, where the Fed seems likely to resume raising rates, Friday's payrolls report showed solid growth in employment, albeit not anywhere like the strength shown in the ADP series, unemployment still near the lowest level since the late 1960s, and an unexpected pick-up in wages growth.
Wages growth – as measured by private-sector average hourly earnings – grew by 0.4% for the third month in a row, with annualised trend growth picking up from 4% earlier this year to about 4½% in June. This is still much lower than the 6% peak reached in late 2021, but is the fastest growth since late last year.
While the Fed places more weight on the less timely employment cost index, which was already growing at a faster rate of about 4¾% in trend terms earlier this year, the resilience in average hourly earnings would likely reinforce policy-makers' concern that it may take longer than expected for core inflation to sustainably return to the 2% target.
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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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