• Steve Coker

Wage Tracker

Hourly wage growth accelerated in the fourth quarter of 2016, rising to the highest level since 2010, providing yet another indication of strength in the economy. The data tracked by the Federal Reserve Bank of Atlanta showed a year over year increase of 3.9% in October and November and a 3.5% increase in December. By comparison, wage growth immediately preceding the 2008 recession peaked at 4.4% in September 2007.

Rising wages are not surprising given that national unemployment remains at 4.8%, at or near what most economists consider full employment, a term that simply means that almost everyone who wants a job already has a job and there are few unemployed workers for companies to hire. As a result, companies face increased competition to hire workers and must increase wages to attract the appropriate talent.

Rising wages are good for consumer spending of course, but rising wages are also a bellwether of rising inflation, and the Federal Reserve will be watching wage growth closely. The tightrope that the Federal Reserve will be forced to walk in the coming months and years will be to slow the economy enough to keep inflation under control while avoiding an abrupt slowdown that would increase in unemployment and start a recession.

"Hourly Wage Tracker", Federal Reserve Bank of Atlanta, January 2017, https://www.frbatlanta.org/research.aspx?panel=2#tab2

"Employment Situation", US Department of Labor Bureau of Labor Statistics, January 2017, https://www.bls.gov/news.release/empsit.toc.htm

#risingwages #inflation #consumerspending

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