wage increases

From January 30th, 2017 client presentation.

Wages HAVE BEEN increasing on an inflation adjusted basis for some time. A tight labor market should put even more pressure on employers to increase wages faster. When there is no one to hire, if you need an employee, you have to hire one away from someone else. You will have to pay them more. If their current employer wants to keep them, they will have to provide an incentive for them to stay.

Increasing wages can only end in 2 places. It’s possible that wages go up (which means employer costs are going up), but prices do not rise. This means lower corporate earnings. It is also possible that wages go up and companies raise prices to protect earnings. This may cause inflation to heat up.

Previously: Earnings drive stock prices