Globally, wages pressures developing - AmpGFX

In the major economies, labour markets are tightening, and this is starting to show through in higher wages, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes

“Wages globally have tended to underwhelm expectations, and the widespread perception is that Phillip’s Curves have flattened out.  But we might be on the cusp of acceleration in wages that surprises global investors.”

“One of the bigger surprises in global economic data last week was the surge in wage data in Japan. Regular time (core) earnings rose 1.3%y/y in March, a high rate since 1997.  This is consistent with the record highs in the jobs-to-applicants ratio at 1.59, and the lowest unemployment rate since 1993.”

“So far, the wages acceleration has had little impact on BoJ monetary policy expectations.  But this trend suggests that Japan is making genuine progress towards sustainable inflation.”

“Even in the Eurozone, which might be regarded as behind the labour market cycle in than the other three major economies, wages growth is developing.  In April, the ECB said in its Account of the monetary policy meeting, 7-8 March, “Recent developments had confirmed a gradual upward trend. This increase was mainly attributable to higher contributions from wage drift, which usually reacted to cyclical developments with a shorter lag than negotiated wages. According to the March 2018 ECB staff projections, growth in compensation per employee was expected to pick up from 1.6% in 2017 to 2.7% in 2020.”