Schroders: US-Wirtschaft mit starker Erholung

US: Why worry about rising wages?

In the last Viewpoint we argued that US unemployment would fall significantly further and that wages were likely to accelerate, an outcome that would turn the Fed in a more hawkish direction. The labour market remains key and in her recent Q&A session following Congressional testimony Fed chair Janet Yellen said that if the labour market "continues to" improve more quickly than anticipated by the FOMC, rate hikes would probably occur "sooner" and be "more rapid" than currently envisioned. Such comment supports our baseline forecast that US interest rates will rise ahead of market expectations to 1.5% by the end of next year and move higher in 2016 (see chart on front page). Recent survey evidence from the National Federation of Independent Business (NFIB) points toward an acceleration in wages over the next six months with the number of firms planning to increase worker compensation rising significantly.

Whilst these developments increase our conviction, the question has been asked as to why economists seem so worried about wage growth at the present time. After all, a key aim of economic activity is to deliver a rising level of income, thus boosting living standards and the welfare of the household sector. Higher wages might also help arrest the trend toward increasing income inequality. Indeed, given the squeeze on real wages in the US and UK in recent years, should we not welcome a rise in worker pay as good news?

The frequent answer is that higher wages will result in higher inflation, forcing central banks to tighten policy and bring activity back down. Yet such concern on wages seems misplaced when looking at the link with inflation. Empirical analysis finds little evidence that higher wages cause higher prices and if anything the link runs from inflation to wages.

Der vollständige Marktausblick einschließlich vieler Grafiken im pdf-Dokument