The US economy may be past full employment but wage increases are not following suit. Wages in the US are said to have increased only ‘moderately’ in spite of what should be an employee’s market. In fact growth in general in the US is stated to be gathering steam, yet many are not seeing the benefits of this.
Wage Increases Not Rising in Line With Employment
New Fed Chairman, Jerome Powell, will be presenting a report on employment and inflation to Congress on Tuesday. It is evident that inflationary pressures are certainly not arising from wage increases, which have not risen in line with employment. This may not continue if demand for employees continues to rise, and the employment market becomes more competitive. For now, that is not the case.
US Economy Remains Strong
That should indicate that there is still a bit of slack in the employment market. Any significant shortages in the employment market would have led to a faster rate of wage increases. This is not the case, which tends to indicate that there are still plenty workers out there seeking work.
What may be in shortage are workers with specific qualifications. Some employers have been reported as having difficulties in finding employees with certain skills. Nevertheless, the US economy is strong with no apparent issues.
Interest Rate Hike Expected in March
The FOMC is expected to raise interest rates by 0.25% in March, with a further two hikes forecast for the rest of the year. In spite of that, many forecasters still believe that there will be a total of 4 rate increases in 2018. However, a lack of significant wage rises, and also stagnant retail prices, are tending to allay fears of inflation. At least for now!
Should wages and retail prices begin to slant upwards, then inflation fears will rise with them. For now, inflation in the US is expected to remain at around an annual figure of around 2% in accordance with the Fed’s forecast. However, should inflation rise above this figure, then interest rate increases will likely follow pretty rapidly.
