The Most Important Number of the Week Is 0.3%
Despite reports of rising salaries, the gain in average hourly earnings was muted in June, reducing fears of a wage-price spiral.
Much of June’s job gains and wage growth came in the leisure and hospitality industries.
Photographer: Frederic J. Brown/AFP/Getty Images
It may be a cliche, but there’s a lot of truth to the saying that anecdotes aren’t the economy. Just consider the latest U.S. monthly employment report. Even with all the breathless reporting of late about how companies are having a hard time finding employees and are resorting to boosting starting salaries and offering signing bonuses, there’s surprisingly little evidence of broad wage inflation. In fact, average hourly earnings grew just 0.3% in June — in line with the pre-pandemic average and lower than the previous two months — despite the addition of 850,000 jobs last month, the most since August.
The issue is important because the inflation hawks are worried the Federal Reserve is too complacent with its wait-and-see approach. They say by not acting now, the central bank risks stoking a “wage-price spiral” in which higher earnings spark a surge in consumer spending that strains production capacity. Companies respond by increasing prices, which leads to workers demanding bigger pay increases to stay ahead of the rising cost of living. But if wage inflation is muted, it reduces the pressure on the Fed to prematurely tighten monetary policy, which could hinder the recovery and throw financial markets in disarray.