First the good news: wages are rising; now the bad news: prices are rising much faster than wages.
The October CPI report revealed that total CPI was up an insane 6.2% yoy – the highest print since Volcker’s fight with hyperinflation – with core CPI up 4.6% yoy. At the same time, the gain in wages has also been impressive with average hourly earnings running at 4.9% yoy and the broader measure the employment cost index running at 3.7% percent year-over-year, these numbers are well lower. The Atlanta Fed finds that wages for job switches are up 5.4%, the highest since January 2002, and it is starting to bleed into jobs stayers where wages are now edging higher.
So the question, as BofA notes, is which is more powerful: earning more or paying more? Not surprisingly – and in the latest humiliation for the Biden administration – the gain in prices seems to be winning.