Commentary
When we read about the U.S. economy, we often get wage growth as a signal of a strong labor market. It’s hardly a strong market when the labor participation rate and the employment-to-population ratio are both below the February 2020 levels and have been stagnant for months.
Additionally, the headline figure of 4.6 percent annualized wage growth is misleading, as it shows a nominal and average figure that disguises a much tougher environment. According to the Bureau of Labor Statistics, “From December 2021 to December 2022, real average hourly earnings decreased 1.1 percent, seasonally adjusted.”
When we look at wage growth by sector, the picture is even worse. According to JP Morgan, no sector in the U.S. economy has seen a rise in wages that covers inflation. Only two sectors in the U.S. economy, information and financial services, show more than 2 percent wage growth in annualized seasonally adjusted January figures. Furthermore, construction, manufacturing, education, and health services, retail, leisure, and hospitality, as well as professional business services show a negative nominal annualized change of minus 2 to minus 6 percent. This means an even worse real figure after discounting inflation….