Wages of production and non-supervisory employees accelerate for third month to 5% annualized. Turns out, the big drop in August was a head fake.
By Wolf Richter for WOLF STREET.
The labor market in November showed once again that it refuses to kowtow to Wall Street, which has wanted a decline in the labor market along with a recession that would force the Fed to cut rates, and this has been going on since about mid last year, but now it has reached a crescendo with rate-cut bets for 2024 that would assume a plunge in the labor market. But hilariously, the labor market just keeps on plugging, and the crazy gyrations during the pandemic caused by labor shortages and other issues have settled down.
The number of working people jumped, the number of jobs created rose more than feared, the labor force jumped, the number of unemployed people fell and was low, the unemployment rate fell and was low, the employment-population ratio rose…
So this is a labor market that is in pretty good shape, in amazingly good shape actually, given the interest rate environment. It’s roughly growing at similar and higher rates than before the pandemic, despite the interest rate environment.
With the labor shortages and gyrations during the pandemic having settled down, one would expect wages to slow their growth in alignment with this normalizing scenario, but they did not.
Fed trigger point: Wages
Wage growth accelerated. And as recent labor actions have shown – they won massive increases in wages for 2024 and future years – wage growth might just be the thing that doesn’t cooperate with this normalizing scenario.
Average hourly wages of Production and Nonsupervisory Employees in the private sector jumped by 0.41% in November (5.0% annualized), the third month in a row of acceleration, after the low point in August. This puts November wage growth at the upper end of the range since late last year (red line in the chart below).
These “production and non-supervisory employees” include working supervisors and all employees in nonsupervisory roles, such as engineers, designers, doctors and nurses, teachers, office workers, sales people, bartenders, technicians, drivers, retail workers, wait staff, construction workers, plumbers, etc. This is the bulk of private sector employment.
The three month-to-month accelerations in a row cause the three-month moving average to jump to 0.34% (blue line).
Note the big deceleration in August to 0.21% growth, which has now turned out to have been a head fake.
Compared to a year ago, average hourly wages of Production and Nonsupervisory Employees decelerated to a growth rate of 4.31%, down from 4.36% in the prior month. The deceleration largely stemmed from the month-to-month head-fake in August.
On the verge of a year-over-year U-Turn.
Another month of 0.41% growth, so in December, and the year-over-year growth rate would be stuck at 4.3%.
And a second month of 0.41% wage growth, so in January, and the year-over-year growth rate would rise to 4.42%.
In other words, year-over-year wage growth, with another two months of this type of increase, would be U-turning and heading higher.
Month-to-month wage growth is very zigzaggy, so it’s unlikely it will produce three months in a row of the same month-to-month growth figure. Instead, it will zigzag. But the last three months showed that the August zag to +0.28% was a head fake, followed by three zigs.
Month-to-month wage growth is now back at the upper range where it had been earlier this year and late last year. It got back to that upper end of the range by re-accelerating three months in a row, which it hadn’t done since early 2021 during the big gyrations. And this upper end of the range is an annualized wage growth of 5%. And for the Fed, this kind of wage growth is not compatible with inflation decelerating toward 2%.
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The post Wage Growth Not Cooperating with Rosy Scenario of a Normalizing Labor Market appeared first on Energy News Beat.
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