Heather Long
@byHeatherLong
Chief economist @NavyFederal | Marketplace contributor | Data aficionado | Views my own | Email: heather_long@navyfederal.org
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JUST IN: A blowout jobs report. The US economy added 165,000 jobs in October. That’s above expectations of ~65k. August and September also revised a lot higher. There was a big surge in professional and biz services hiring (+70k!), along with ongoing gains in healthcare and transportation
Unemployment rate: 4.1% (down from 4.2% in September)
Wage growth: 3.1% -->That’s below inflation for the 7th straight month, but it was stronger than expected.
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Important chart from @EconBerger
Healthcare costs are soaring again for employers (and frankly for most Americans). Take a look at the green line on the chart.
A key reason employers aren't eager to boost wages right now is b/c they are paying a lot more toward healthcare costs.
"Wage growth is being outpaced by benefit cost growth. And a major recent driver for benefit cost growth is employer health insurance contributions: they’re growing at 6.4% Y/Y, matching the fastest pace in two decades." - Economist Guy Berger
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Here's the key problem...inflation has wiped out wage gains for 6 months now.
It's a financial squeeze.
Americans are trying to work more hours to make up for it, but many are still falling behind.
Many people are worse off. As BLS wrote,
In the past year, "real average hourly earnings decreased 0.7%. The change in real average hourly earnings combined with a 0.6% increase in the average workweek resulted in a 0.1% decrease in real average weekly earnings."
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JUST IN: A hot inflation report. Inflation jumped back up to 3.7% (y/y) in September, the highest rate since May. The spike was largely driven by rising gas and diesel prices. Higher airfares and used car prices also triggered the 0.6% monthly gain (biggest since May).
Core CPI, which excludes food and energy, climbed to 2.6% -->This was worse than expected and up from 2.4% in August.
The big problem = Inflation rose 3.7% in the past year, wiping out 3% average wage gains.
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JUST IN: A medicore September jobs report. The US economy added only 29,000 jobs in September (well below ~80k expected). On top of that, there were downward revisions: July was revised down to -10k and August to 133k.
Unemployment rate: 4.2% (up from 4.1% in August)
The biggest sore spot = wage growth of 3% in past year. That’s a new 5-year low and it’s wiped out entirely by ~3.4% inflation.
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A September Fed rate hike is almost locked in now
85% chance the Fed hikes next week.
It's the right call.
The risks are growing that inflation remains entrenched (or keeps broadening). Fed Chair Warsh doesn't want to make the same mistake Powell did of waiting too long to hike.
My focus is on middle and lower-income Americans. I believe a rate hike might *help* them a) by containing inflation and b) by potentially LOWERING borrowing costs as bond investors have more confidence the Fed is on the case.
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Inflation is totally wiping out wage gains.
The financial squeeze is real for many Americans right now.
Wage growth in the past year: 3.2% -->Lowest in 5 years
Inflation: 3.5%+
Wage growth is *not* contributing to inflation right now. That means many workers will struggle in the months ahead.
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