U.S. employers spent only 1 percent more on wages and benefits in last year’s final three months than in the previous quarter, the Labor Department reported, even though they claim the economy added almost 750,000 new jobs during the period.
The figure fell below the third quarter’s 1.2-percent growth in compensation and was far below the 4-percent monthly wage gains that prevailed during the first half of last year.
Average private-sector hourly wages rose at an annual rate of 4.4 percent in January, while the Consumer Price Index added 6.5 percent in December.
Wages rose at a 4-percent yearly rate in the last quarter, down from 4.8 percent in December and well off the peak of 5.8 percent in March 2022.
Wage growth is easing more slowly than had been expected, especially after January allegedly brought on 517,000 new workers. (See our Economic Update in this issue.)
If their numbers are accurate, booming employment tends to lift wages, which can fuel inflation. The slowdown in pay increases takes pressure off prices, adding evidence to recent signals that inflation is slowing.
That could give the U.S. Federal Reserve cause to consider pausing its campaign of rate increases in its battle to yank inflation back to the central bank’s 2-percent target.
In the past, the Fed warned of a wage-price spiral, in which the two chase each other upward in a cycle that would be difficult to halt. The new figures indicate the chances of that happening have shrunk.
Bank officials have said repeatedly that hiring needs to slow markedly to prevent runaway wage growth.
TRENDPOST: You know an economy is under water and how dire the state of the nation has become when wages growing more slowly than inflation is seen as good news and cheered by the Bankster Bandits and the Wall Street’s White Shoe Boys.
Consumer spending accounts for some 70 percent of the U.S. economy. As long as inflation outpaces wage growth, consumers will continue to cut spending and recessionary pressures will increase.