US: Wages continue to be the weak link in labour market data

"Average annual growth remains just 2.7%, which is slower than the cost of living as measured by CPI – which is running at 2.9%," ING analysts note.

Key quotes

"One argument is that companies are facing higher benefit costs – medical and pensions – which means they are being more restrictive on salaries. Nonetheless, the jobs market is very tight, and there is anecdotal evidence that pay is starting to rise more broadly."

"Indeed, the NFIB reports that in the small business sector (which represents half of all US jobs) a net 32% of companies are raising compensation as they increasingly struggle to fill job openings. In July, 37% of firms said they were unable to fill vacant positions - a record high in the survey’s 45-year history."

"However, we must take into account statistical effects. There were 23 working days in August, but only 21 in July so if you are on a fixed salary this means that your daily and hourly pay rate will effectively be lower in August than it was in July as pay is spread over more days. Given wage growth is reported as an hourly average change, this tends to lower the growth number. Consequently, there is perhaps some downside risk to our forecast of 0.3%MoM/2.8%YoY." 

"However, there are only 19 working days in September so this technical quirk will unwind and could result in a big rebound in wage growth next month. The consensus forecast is 0.2%MoM/2.7%YoY."