Tags: employment | wages | inflation | monthly

Employment Report Shows Wages Up 4.9 percent in Past Year

By    |   Wednesday, 08 Oct 2014 08:32 AM

Unemployment is dropping and wages are rising. That news is not being widely covered, but it might mean the Federal Reserve will be forced to raise interest rates soon.

In the monthly employment, wage growth is reported on a month over month basis. In September, wages in the private sector fell by 0.1 percent from August. When analyzed on a year over year basis, we find that wages are up 4.9 percent compared with a year ago.

Logging and mining workers enjoyed the biggest gains, with wages up 8.2 percent. Employees classified as "professional and business services" workers saw wages grow 7.2 percent. The next highest gain was in leisure and hospitality, with a 6.2 percent gain. Retail workers saw an average wage increase of 3.7 percent in the past year.

Wages are growing faster than inflation is in every industry except utilities. Costs of benefits, especially health insurance, which is provided to a majority of all employees, are also rising faster than inflation is. This could result in an inflationary spiral in the current environment where companies raise prices and workers demand higher wages. With low unemployment, companies could be forced to pay higher wages and then raise their prices even more.

This environment could prove difficult for the Federal Reserve to navigate. They have been able to keep interest rates low because inflation is low. With wages finally increasing, inflation is a greater concern.

This environment could also prove difficult for investors to navigate. If traders believe the Fed is acting too quickly or too slowly, stocks are likely to decline sharply. To get ahead of the news, investors should look at Table B-9, Indexes of aggregate weekly hours and payrolls, in the monthly employment report. And they should calculate the annual changes in wages instead of relying on the reported monthly changes.

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MichaelCarr
Unemployment is dropping and wages are rising. That news is not being widely covered, but it might mean the Federal Reserve will be forced to raise interest rates soon.
employment, wages, inflation, monthly
305
2014-32-08
Wednesday, 08 Oct 2014 08:32 AM
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