US wages already overheating?

Advertisement

Morgan Stanley with a note on rising US wages. I agree that wages growth will be better this cycle than last owing to larger fiscal stimulus and faster growth but am still skeptical that it represents much inflation risk. Recent gains look like catch-up growth owing to temporary supply-side frictions. There’s plenty of underlying slack that will loosen as post-COVID normal evolves.

It’s Getting Hot

When the COVID lockdowns first hit, the primary risk facing companies centered on how to survive the sharpest economic downturn in 90 years. On reflection, what companies were able to accomplish over the past year with most of the labor force working from home is an economic miracle. In aggregate, the US economy surpassed its pre-COVID peak last quarter, just nine months after the trough of the recession. Profits returned to peak levels even faster, with many companies feeling no effects of the recession at all. In fact, essential businesses and technology enablers achieved an acceleration in pre-COVID sales trends, accompanied by record profitability as labor and other costs fell precipitously.

The full text of this article is available to MacroBusiness subscribers

$1 for your first month, then:
Cancel at any time through our billing provider, Stripe
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.