‘Alarmingly Big’ U.S. Wages Gain Undermines Argument That Inflation Is Transitory
(Bloomberg) -- While the U.S. government’s first estimate of third-quarter growth garnered plenty of attention this week, there was another economic data point that raised quite a few eyebrows.
The third-quarter employment cost index report showed civilian wages leapt 1.5%, the largest advance in series data back to 2001, as companies across a swath of sectors resorted to higher pay against a backdrop of labor shortages.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, called it “alarmingly big.” Still, it’s easy to see more tempered wage growth in the months ahead as Americans return to the workforce and employers find success filling a near-record number of vacancies.
“If that doesn’t happen, and wage growth continues to run at this pace, then Game Over” for the transitory-inflation argument, he said in a note.
Below is a roundup of some of the economic data out this week with an eye on inflation.
Inflation Metrics This Week
- Personal consumption expenditures price index rose 4.38% and core PCE gauge climbed 3.64%, both largest annual advances since 1991
- Prices paid by manufacturers in the Kansas City Fed region climbed to the highest in data back to 1994; prices received also increased, while a measure of supplier delivery times jumped to a record
- Conference Board’s October confidence report showed consumers anticipate a higher inflation rate in the year ahead. Some 64.4% also expect interest rates to be higher, the biggest share since January 2019
- Texas service activity survey from the Dallas Fed showed the highest reading on wages and benefits, as well as expectations for pay, in data back to January 2007. A gauge of input prices rose to a 13-year high
- Richmond Fed average growth rate of prices received by the region’s manufacturers climbed to 9.42%, the highest in data to 1997
- Dallas Fed manufacturing prices received index rose to 49.8 in October, the highest in data to 2004, from 44 a month earlier; survey also showed an increase in unfilled orders and slower delivery times on supply-chain disruptions
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