Someday, the Federal Reserve Open Market Committee will raise its interest rate target from near zero. And stocks dropped Monday in part because Fed Vice Chairman Stanley Fischer signaled over the weekend that the first bump could come when the Fed meets later this month.
The Fed chairman, Janet Yellen, has also said she expects an increase this year — if economic indicators stay strong. But have those indicators held up?
As the two Bureau of Labor Statistics charts above show (you can flip between the two), the growth in wages and employer costs have both headed back down and don’t appear to be saying inflation above the Fed’s 2% target is anywhere around the corner.
Real average hourly earnings, thankfully, have been in an up trend since 2011. But even at its peak, the wage growth rate barely broke through 2.5%, and it has been dropping lately. And the rise in employers’ overall costs per hour — wages, overall compensation, all benefits — also is low and declining of late. Even health-care costs’ growth, the one component that has ticked back up, is below 3% and remains in a big down trend historically.
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Add in low prices for oil and other commodities, a trend that China’s slowdown is likely to support, and one can see why the Fed could — and many say should — pass on a rate increase later this month, and even into next year.
Greg Hack also can be reached at 816-234-4439. He sounds the retweet @GregHack.