During this year’s first quarter, wages and benefits paid to workers rose 1.2 percent, according to the U.S. labor department’s Employment Cost Index.
The figure exceeded both the previous quarter’s 1-percent gain and analysts’ predictions of 1.1 percent.
Compensation for service jobs ticked down from 1.2 percent in 2022’s final quarter to 1.1 percent. Construction, hospital, and maintenance workers snagged the largest pay increases, along with employees in leisure and hospitality businesses.
Wages fell most sharply among finance and insurance company staff, highlighting a softened white-collar jobs market that we report in “Layoffs Surge Among High-Income Earners” in this issue.
Year over year, overall workers’ compensation climbed 4.8 percent, more than twice the pre-COVID average of 2.2 percent but still less than the 5.1-percent rate that ended 2022.
At the same time, the Core Personal Consumption Expenditure Index, the U.S. Federal Reserve’s primary inflation gauge, ran at an annual clip of 4.6 percent, beating analysts’ forecasts but also edging down from 4.7 percent in the quarter before.
The continued rise in both wages and prices hints at a possible wage-price spiral, in which both chase each other higher. Such spirals are difficult to break.
As a result, analysts now wonder if the Fed will see a need to either increase its key interest rate by more than the expected quarter point this week or to continue raising rates in the future.
The central bank has hinted previously it plans to stop raising rates after this week. Markets have priced in that probability.
“The latest readings aren’t moving in the right direction from the Fed’s perspective,” Nancy Vanden Houten, Oxford Economics’ chief economist, said to the Financial Times.
The numbers indicate that the Fed will “keep policy restrictive for some time until inflation moves convincingly” closer to the central bank’s 2-percent target rate, Rubeela Farooqi, chief U.S. economist for High Frequency Economics, said in a Wall Street Journal interview.
TREND FORECAST: As we have greatly detailed each week with our job loss review, those who are mostly being fired are higher paid workers and that, as we note in this week’s article, POWELL PUNKED BY CALL FROM ZELENSKY IMPERSONATOR, inflation is greatly outpacing wage increases.
Thus, across the economic spectrum the higher prices have hit the average American consumer hard. Yet, the Fed and The Street keep blaming the plantation workers of Slavelandia for rising inflation rather than the Fed’s zero interest rate policy and the countless trillions Washington pumped into the system to fight the COVID War.
However, as we have forecast, with the current banking crisis that has hit the United States—PacWest Bancorp plummeted some 35 percent today while Western Alliance Bancorp slumped 27 percent—tomorrow may be the last day of Fed interest rate hikes in 2023.