White House's Hassett Says Wage Growth Will Exceed 4% This Year

(Bloomberg) -- President Donald Trump’s chief economist predicted wage growth in the U.S. will accelerate past 4 percent this year amid a strong labor market, more capital investment and rising productivity.

“What we’re seeing is basically a really strong economy with solid wage growth that I think is going to improve this year,” Kevin Hassett, chairman of the White House’s Council of Economic Advisers, said in an interview Monday on Bloomberg Television.

As companies invest more after tax cuts and the job market tightens, he said the administration “very much” expects year-over-year nominal wage growth that’s currently just above 3 percent to exceed 4 percent in 2019, he said. Most analysts have expected wage gains to remain close to 3 percent this year, according to Bloomberg surveys.

Hassett also said the White House is “definitely seeing productivity go up” and that’s one reason the pay gains don’t necessarily have to be inflationary, he said. Adjusted for inflation, wages rose 1.3 percent in December from a year earlier.

The most recent figures show productivity rose in the third quarter at a 2.3 percent annualized rate, which is above average for this expansion.

Weighing on the U.S. economic outlook is uncertainty about the U.S. trade war with China, but Hassett said concerns should diminish as talks yield progress toward a resolution.

“Uncertainty can be a negative for the economy,” he said. “Whatever the uncertainty effects are, they would’ve had to have been a lot bigger last year than they’re going to be this year. We’re moving things forward, we’ve had a lot of productive conversations. The hope is, especially if the deal with China comes through, that there will be a lot of positive resolution of uncertainty. Last year you just had uncertainty.”

With economic growth last year of about 3 percent even amid trade uncertainty, he said the easing of uncertainty this year poses an “upside risk.”

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