### Summary
Average wages in Britain rose at a rate of 7.8% annually between April and June, outpacing inflation of 6.8% in July. However, the long-term picture shows that workers are still no better off than they were four years ago, indicating the need for sustained pay rises to improve living standards.
### Facts
- 💰 Average wages in Britain rose at a rate of 7.8% annually between April and June.
- 📉 Inflation in July was 6.8%, lower than the previous month's figure of 7.9%.
- ⚠️ The long-term data shows that workers are no better off than they were four years ago.
- 🔒 The Bank of England is concerned about wage rises leading to inflation becoming entrenched in the economy.
- 📉 The UK's productivity levels have fallen behind its peers since the financial crisis.
### Additional Information
- The Bank of England and Chancellor discourage asking for higher wages, fearing a wage-price spiral.
- The current UK real average weekly earnings figure is the same as it was in May 2019 and December 2010, and no better than in March 2006.
- Sustained pay rises are needed for workers to improve their living standards.
### Summary
Wharton finance professor Jeremy Siegel believes that increased productivity will prevent a resurgence in inflation in the US.
### Facts
- 💰 Wharton finance professor Jeremy Siegel is not worried about inflation rebounding in the US, despite the signs of a resilient economy.
- 💼 GDP is expected to grow 5.8% over the third quarter, according to an estimate from the Atlanta Fed.
- 💼 Job growth and wage growth remain strong, with the US adding 187,000 payrolls and hourly earnings up 4.4% year over year in July.
- 💼 The recent improvement in statistics is attributed to a turnaround in productivity, which was poor last year.
- 💼 Siegel believes that the bounce-back in productivity will keep inflation in check and justify higher wages.
- 💼 However, other experts, like BlackRock, are more skeptical about the path of inflation.
- 💼 The Fed remains concerned about inflation and is open to more tightening measures.
- 💼 Stocks have slid as investors bet on the Fed hiking rates before the end of the year.
### Summary
Economists and the Reserve Bank of Australia are determined to combat inflation, but their focus on wage increases as the cause of inflation overlooks the pricing power of large firms and the lack of competition in the market.
### Facts
- Economists argue that businesses raise prices in response to market forces, not out of greed.
- However, the rapid rise in prices is often perpetuated by workers and their unions demanding higher wages to keep up with the cost of living.
- The solution proposed is for workers to accept a small pay rise and for interest rates to be raised to put pressure on workers with mortgages.
- The Reserve Bank believes that a rise in the unemployment rate by 1 percentage point to 4.5% would help bring down inflation.
- An increase in competition between small firms is needed to make the price mechanism work as intended, but oligopolies dominate many industries in Australia.
- While other countries have recognized rising profit margins as a cause of inflation, the Australian government has dismissed this analysis.
### Opinion
- The focus on wage increases as the main cause of inflation overlooks the pricing power of large firms and the lack of competition in the market.
- Strengthening laws defending competition is necessary to fix inflation.
### Summary
Real wages in most European countries have fallen due to record-high inflation, with nominal wage growth being eroded.
### Facts
- :chart_with_downwards_trend: Real hourly wages decreased in 22 out of 24 European countries between Q1 2022 and Q1 2023, primarily due to inflation exceeding nominal wage growth.
- :chart_with_upwards_trend: Belgium and the Netherlands were the only countries where real hourly wages increased during this period.
- :chart_with_downwards_trend: France, the UK, and Germany also experienced a decline in real hourly wages.
- :money_with_wings: Nominal hourly wages increased in all 24 countries, but the inflation rate was higher, causing real wages to decrease.
- :moneybag: Real wages in Europe have fallen below pre-pandemic levels in most countries, despite recent nominal wage growth.
- :chart_with_downwards_trend: Cumulative change in real hourly wages between Q4 2019 and Q4 2022 ranged from -9.6% in Estonia to 7.1% in Lithuania, with 18 out of 25 countries experiencing a decline.
- :briefcase: Workers in low-paying industries fared relatively better, with real wages performing better than in high-paying industries in many European countries.
(Note: Some bullet points have been omitted for brevity.)
U.S. economic growth may be accelerating in the second half of 2023, defying earlier recession forecasts and leading to a repricing of long-term inflation and interest rate assumptions.
New hires are experiencing declining wages in various sectors such as technology and transportation, which could impact job hopping and take time to reflect in federal data, posing challenges for the Federal Reserve in managing inflation.
The Bank of Canada may shift its focus from the output gap to labor market indicators, such as unemployment and wages, in order to make inflation forecasts and guide its interest rate decisions, according to a report by CIBC economists. The report suggests that the labor market has become a more reliable indicator of excess demand or supply, and forecasts that if the job market outlook suggests it's not necessary, there may be no more rate hikes this year and rate cuts in early 2024.
The US jobs data for July suggests a cooling employment market, with a drop in labor demand and easing of hiring conditions, which could help lower inflation without a significant rise in unemployment rates.
The US job market shows signs of slowing but remains resilient, with 187,000 jobs added in August and a rise in the unemployment rate to 3.8%, as more people actively look for work. Wage gains are easing, signaling a potential slowdown in inflation, and the Federal Reserve may decide against further interest rate hikes.
Wage growth in the UK has caught up with rising prices, resulting in real pay no longer falling, according to official figures, although the unemployment rate has risen and job vacancies have fallen. The data will also impact the state pension, which is set to increase by 8.5% next April.
The Bureau of Labor Statistics is expected to release a report showing steady growth in consumer prices with a year-on-year inflation increase of 3.6% in August, indicating that the Federal Reserve's efforts to control inflation are working but there may be more rate hikes if inflation does not decline.
The labor markets are expected to pause on rate changes as the economy slows down, with growth in employment and capital expenditure decreasing and downside risks increasing, such as higher interest payments for the government and a potential United Auto Workers strike. However, there is hope for a rebound in 2024 with a potential pause in rate cuts and moderating inflation.
US inflation is expected to continue its slowdown in the coming months due to easing car prices, declining rents, and a potential slowdown in the job market.
Wages in Brighton and Hove have outpaced inflation, while the UK as a whole has seen a real-terms pay increase for the first time since March 2022, although low-paid workers in certain sectors continue to experience wage stagnation.
The retail, leisure and hospitality, and accommodation and food services industries experienced wage growth that outpaced inflation due to the high demand and staffing shortages after the pandemic, but there are no guaranteed inflation-proof industries, and it is important for individuals to focus on securing jobs that offer upward mobility and higher income to keep up with inflation.
Inflation is expected to rebound in 2024 due to a mismatch between supply and demand created by the shift from services to goods during the pandemic, as well as a chronic shortage of workers, according to BlackRock strategists. This could lead to higher interest rates and a higher risk of recession.
The Federal Reserve's forecast for the U.S. economy shows that while inflation and unemployment are close to their goals, economic growth will remain weak, primarily due to low labor productivity.
The US economy maintained solid growth in the second quarter, but a government shutdown and an ongoing auto workers strike are clouding the outlook for the rest of 2023.
The rate of pay increases for job switchers in the US has slowed to 9%, the lowest rate since June 2021, with the difference between wage growth gained by leaving a job versus staying at its slimmest margin since October 2020, according to data from ADP.
The United States is expected to add 170,000 jobs in September, which would mark the fourth consecutive month with an increase below 200,000, potentially exacerbating the labor shortage and making it difficult for the Fed to control inflation. The unemployment rate is forecast to fall slightly to 3.7%, while wage growth is expected to rise 0.3%. The impact of labor-union strikes, such as the expanded strike by auto workers, could also affect employment growth.
