Tighter labor market contributing to stronger wage growth
The U.S. labor market earned a gold medal in July as broad-based employment gains show the economy is in much better condition than the recent GDP report would suggest. July’s nonfarm payroll additions totaled 255,000, with 63.7 percent of industries reporting an increase in hiring. This is not an economy on the verge of recession.
The most encouraging aspect of this employment report is that the composition of hiring showed a surge in high-wage job creation. Aggregate hours worked increased by 0.5 percent on the month, which indicates that the income and spending environment for the summer months is much brighter than the corporate earnings data would suggest. Average hourly earnings are up 2.6 percent on a year-ago basis and increased 0.3 percent on the month.
In this video brief I discuss how a tighter labor market is contributing to stronger-than-anticipated wage growth and why that is likely to continue for quite some time.
Read this month's issue of The Real Economy.