Signs of Slowing Wage Inflation Boost Markets -- WSJ

The Wall Street Journal · 01/06/2023 09:18

-- Average hourly earnings for private-sector employers rose 4.6% in December from a year earlier, according to the Labor Department's nonfarm payrolls report released on Friday. That was down from a 5.1% increase in November, and less than the 5% increase projected by economists. -- "Investors are celebrating the fact that the average hourly earnings number was less than expected," says Michael Arone, chief investment strategist at State Street Global Advisors. "There was fear going in that wage inflation would remain hot."

By Alexander Osipovich

Markets rallied after this morning's jobs report (https://www.wsj.com/livecoverage/stock-market-news-today-01-06-2023-december-jobs-report-unemployment-rate) because it showed a slowdown in wage increases, analysts say, a sign that the Federal Reserve's battle against inflation may be having an impact.

Futures on the S&P 500 were recently up 0.9%, after being slightly negative for the day prior to the report's 8:30 a.m. ET release.

U.S. workers benefited from a resilient jobs market in 2022, but a robust increase in their pay raised fears of a so-called wage-price spiral. In such a scenario, employees demand greater pay hikes in response to climbing prices, and the influx of money into their pockets fuels further inflation. A downtick in wage hikes means such a scenario is less likely, easing pressure on the Fed to keep hiking interest rates.

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January 06, 2023 09:18 ET (14:18 GMT)