Tom Hudson: This week, wages are the number to watch
06/27/2014 2:03 PM
06/27/2014 2:04 PM
It hasn’t been since the winter of 2012 that the U.S. job market has been as hot as it’s been this past spring. While that’s turning the rhetoric on inflation, it’s unlikely to turn up the heat on the Federal Reserve to raise interest rates.
It’s good news that Americans have more employment choices. Companies have been creating new jobs at a pace since February that has added 924,000 new work opportunities in four months. And people are getting paid more. When the June data is released Thursday, wages will be the number to watch.
Pay is up two percent over the past year. No one worries when his or her paychecks get bigger. No one, except monetary policy makers and bond investors when those paychecks are rising fast. It is a fact of inflation that rising wages contribute to a sustained increase in prices, pinching purchasing power.
Inflation worries have been simmering for years. In 2007, it was oil at $149 per barrel that fueled inflation concerns. In 2012, when the Federal Reserve began buying U.S. government bonds in its effort to jump-start the economy, inflation hawks howled that all the money pushed into the economy could only lead to a inflationary conditions. Last year, even the Federal Reserve’s own advisory council expressed concern about “breakout” inflation.
But all along, yearly earnings growth has been mediocre, averaging just over 2%. That’s a Goldilocks level. Prior to the Great Recession, earnings were growing by over three percent per year. While the unemployment rate dropped below the Central Bank’s target of 6.5 percent in April, earnings power, to the frustration of many American households but the comfort of the Federal Reserve, remains in check.
Tom Hudson hosts "The Sunshine Economy" on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.
Oops, you haven't selected any newsletters. Please check the box next to one or more of our email newsletters and submit again.
Oops, you didn't provide a valid email address. Please double-check the email field and submit again.
Join the Discussion
Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.