2024-05-01 08:45:00 ET
Summary
- US labour costs accelerated in the first quarter, led by the government sector.
- Hikes to state minimum wage levels contributed to higher private sector labour costs.
- This is the Federal Reserve’s favoured measure on labour market inflation pressures and provides further ammunition to justify a hawkish shift at the FOMC meeting.
Labour costs reaccelerate more than expected
We have seen a big jump in the US 1Q employment cost index of 1.2% quarter-on-quarter versus 0.9% in 4Q23, well above the 1% expected and above every single individual forecast in the Bloomberg survey. Not a good look as this is the Federal Reserve's favoured measure of labour costs, and given labour costs are the biggest cost input in a service sector-led economy, such as the US, it can help to keep price pressures elevated. This reinforces the prospect of hawkish messaging from the Fed tomorrow....
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U.S. Employment Costs Reacceleration Incentivises The Fed To Be More Hawkish