Wages Grow Steadily, Defying Fed’s Hopes as it Fights Inflation

That measure, the Employment Cost Index, showed that wages and salaries for private-sector U.S. workers were up 5.1 percent in March from a year earlier. While that is somewhat faster than the gain reported by the overall average hourly earnings figures for April that were released Friday, it is roughly in line with a closely-watched measure within the monthly jobs report that tracks pay gains for rank and file workers.

Pay for production and nonsupervisory workers — essentially, people who are not managers — climbed by 5 percent in the year through April, Friday’s report showed. That number has continued to gradually moderate, even as the slowdown in the overall index has stalled.

Fed policymakers will have another month of job and wage data in hand before they make their next interest-rate decision on June 14, making Friday’s figures just one of many factors that are likely to inform whether they pause rate increases or press ahead with more policy adjustments. Officials will also have further evidence of how much the recent turmoil in the banking sector is slowing the economy before they next meet.

A series of high-profile bank failures have spooked investors and could generate caution at lenders across the country, which could make it harder to access loans for construction projects and mortgages and help to cool growth — but it is unclear so far how large that effect will be.

Perhaps most importantly, officials will receive fresh inflation data before their next decision.

“They’ll need to see the inflation data and digest this holistically,” said Kathy Bostjancic, chief economist at Nationwide. She said that the strong jobs numbers were just one month of data, but that they were “jarring” to see at a moment when economists had been looking for a slowdown.

“Assuming that the inflation numbers continue to trend lower gradually, I think they can go on hold in June,” she said of the Fed. “But it will depend in the inflation readings.”

What Next?

Recent Articles

Leave a Reply

You must be Logged in to post comment.