Wednesday, November 19, 2014

Wage Inflation Remains Abnormally Low (excerpt)

Wage inflation remains abnormally low although the labor market has clearly tightened. The short-term unemployment rate fell to 3.9% during October, the lowest reading since November 2007. Back then, wage inflation was 3.3%. Today, it is only 2.0%. Fed Chair Janet Yellen has said that she believes that wage inflation is too low. She would prefer to see it rise to 3%-4% before starting to normalize the federal funds rate.

I monitor wages in various key industries and am hard-pressed to see any signs of mounting inflationary pressures. During October, here were the y/y increases for the ones we monitor from highest to lowest: leisure & hospitality (3.6%), information services (3.3), mining & logging (2.9), construction (2.6), professional & business services (2.4), retail trade (2.3), financial activities (2.0), manufacturing (1.9), utilities (1.7), transportation & warehousing (1.2), education & health services (1.1), and wholesale trade (1.1).

Today's Morning Briefing: The New Abnormal. (1) Tower of London. (2) From London to Zurich. (3) Is the normal business cycle dead? (4) Volcker was never in the put business. (5) Greenspan and Bernanke Puts. (6) The consequences of minimizing pain. (7) Abnormalities in this cycle. (8) Waiting for Godot and wage inflation. (9) New forces keeping a lid on price inflation. (10) Secular stagnation over there depressing bond yields over here. (11) Producers misjudged Chinese demand. (12) Profit margins still aren’t reverting. (13) Tour of London. (More for subscribers.)

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