Average Hourly Earnings Keep Going Higher, Contributing To Inflation

A tight labor market fuels competition for workers, forcing businesses to offer higher wages to attract talent. While beneficial for employees, this upward pressure on wages contributes to inflation. The latest Non-Farm Payrolls report underscored this dynamic, with hourly earnings jumping 0.5%, exceeding the 0.3% forecast and unsettling investors, driving yields higher.

One unintended consequence of a persistently tight labor market is the sustained upward pressure on wages. With the Federal Reserve's focus on maintaining low unemployment, this wage pressure could become a significant driver of long-term inflation. Continued wage growth makes it increasingly unlikely that inflation will recede significantly.