When Albert Edwards predicted in late 2016 that a surge in wage inflation was imminent, we were confused by this prediction from the world’s preeminent deflationist: after all, not only had not a single economic indicator validated a tighter labor market despite unemployment just above 4%, but as we have have repeatedly demonstrated what little wage inflation existed, was attributable to managerial-level, supervisory positions while the bulk of job creation remained with minimum-wage jobs, which have continued to see virtually no wage growth. Even Morgan Stanley, a far greater bull than Edwards, one month ago admitted that “wage growth is leveling off, may be slowing.”
Which is why we have to give Edwards credit: some 6 months after his initial call, he had the courage to do what is never easy and admit he was wrong, and that contrary to his expectations wages are not going up after all.
Talking about wrong, I have to put my hands up. I have been expecting US wage inflation to roar ahead over the past three months to well above 3%, yet every data release has surprised on the downside. Wage inflation, as measured by average hourly earnings, has actually levelled off at close to 2% while wage inflation for ‘the workers’ is actually slowing (see chart below)! Strictly speaking, “the workers” are defined (by the BLS) as “those who are not primarily employed to direct, supervise, or plan the work of others. Hey, that’s me!
This post was published at Zero Hedge on May 27, 2017.
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