Companies pay workers more for less output — exactly what the Fed doesn't want
The figures continue to defy job-cut headlines across some of the economy's most important sectors.
"The lag arises because firms tend to announce layoffs all at once but then implement the cuts over a few months, and also because people receiving severance pay in some states -- notably
The weekly claims figures followed a detailed update on so-called unit labor costs for
That suggests employers are paying workers more for less output, a worrying condition that could suggest further wage-and-price spirals that aren't offset by improving economic growth. And that's a concern
Productivity Is Key to Wage Impact
"It's not that we don't want wage increases. We want strong wage increases. We just want them to be at a level that's consistent with 2% inflation," Powell told reporters at the Fed's post-meeting news conference on
"Right now, if you factor in standard productivity estimates, wages are running well above what would be consistent with 2% inflation."
That was also evidenced in the so-called prices-paid index of the closely watched ISM manufacturing activity survey, published on Wednesday. The benchmark jumped six points last month to 51.3, even as the overall reading indicated a fifth consecutive month of contraction.
Stocks Could Face Big March Slump As Treasury Yields Leap, Volatility Spikes
The Thursday data were quickly digested by the bond market -- which is acutely attuned to changes in inflation prospects and no doubt influenced by faster-than-expected readings from
Following last night's jump in 10-year notes, the entire
And with two-year yields testing fresh
The leap higher in yields has also lifted bets on both the chances of a 50-basis-point (0.5-percentage point) rate hike from the Fed at its next policy meeting later this month in
Fed Rate Bets Accelerate
The CME Group's FedWatch is now pricing in a 42.1% chance that the Fed will raise rates by 25 basis points in July -- following hikes in March, May and June -- a wager no traders were willing to make at the beginning of February.
"Another week of jobless claims declining and coming in below expectations suggests the labor market continues to withstand the aggressive rate hikes and will keep the Fed on their tightening path," said
The Fed Gets Cover for More Rate Hikes:
"Next week's jobs data will give us a better picture but concerns over a robust labor market leading to more inflationary pressure likely remain," he added.
Capital Economics is suggesting February payrolls, which will be published on
But the firm cautioned that "given the potential impact of weather and seasonality effects ... there is the possibility of another shock last month, albeit mainly to the downside this time."
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