Daily update
Daily update
- This is your monthly reminder that average hourly earnings are not wages, and wages are not labor costs. There is only a weak link from average earnings to inflation pressures from labor costs. Otherwise, it is US employment report Friday—a survey that has been declining in quality in recent years, but which is still a market obsession. Because the US Federal Reserve is a reactive institution, today’s report will impact monetary policy expectations. The skew in market forecasts is for a weaker number.
- Stepping back from the noise the US labor market still suggests a soft landing scenario. Unemployment is sufficiently contained that fear of unemployment is low—encouraging consumption. Wage growth has been trending slower, but the slowdown of inflation is more aggressive (giving rising real wages). Household income has been further helped by increased female participation in the workforce.
- Japan’s August labor market data was not quite so robust—labor earnings were weaker, with negative revisions. However, consumer spending, while falling, fell less than anticipated—as an ageing society, non-earned income like pensions is increasingly important to consumer spending power.
- US House Republicans are still squabbling over the speakership, but the threat of government shutdown is too far off to make markets care.
