US wage increases have remained weak despite the apparent improvement in labour market demand implied by the unemployment rate
US wage increases have remained weak despite the apparent improvement in labour market demand implied by the unemployment rate. The chart (for US private sector production and nonsupervisory employees) offers a 50 year perspective on what has been happening. Friday's US labour market report for April offered some better than expected gains on employment and a further reduction in unemployment. The unemployment rate reduction has important policy making implications but, ultimately, wage pressures dictate whether inflation reappears (and the need for a policy adjustment). Unemployment rates are a relatively simple proxy. The long term chart also highlights the impact on labour prices of occasionally cataclysmic changes in macroeconomic conditions such as occurred in the early 1980s and again after 2008.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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