Waiting (Was) the Hardest Part, But Wage Growth is Finally Kicking In

Key Points

  • The August payroll report was strong, albeit with revision offsets; but the jump in wage growth garnered the most attention…rightly so.

  • Indications are that the “Phillips curve” may be kicking back in and should not have been left for dead.

  • The tight labor market is good news for “Main Street” but has implications for “Wall Street” as well.

Source: Charles Schwab.

Goldilocks may be leaving the building. The reference to the cute girl with the golden ringlets has become a popular way to describe an economic environment that’s not too hot, not too cold. But as Friday’s employment report may be indicating, the days of strong job growth without accompanying upside wage pressure may be ending.

First, the details

Non-farm payrolls were up 201k, which was above the consensus of 190k. However, revisions subtracted 50k from the prior two months. What garnered more attention though was the jump in average hourly earnings, which were +0.4% month/month and 2.9% year/year (the latter is up from 2.5% on average last year). The unemployment rate was unchanged at 3.9%; with household survey employment -423k after +389k last month. But that drop was because the size of the labor force fell by 469k.