Average hourly earnings increased 0.73% m/m in January, a stronger rise than in December (+0.54% m/m). The y/y accelerated to 5.68%. The Treasury market has responded, with big moves: the 2-year Treasury yield breached 1.30%. The 10-year yield was up past 1.90%. WTI crude climbed 2.6% on the day and is now over $92.5/barrel. US gasoline prices surged to their highest since 2014 this morning: base effects mean that energy price increases in 2022 won’t have the same effect on the CPI as in 2021. But current high inflation prints will nevertheless prove sticky.
There is a caveat. Average weekly hours for all employees dropped from 34.7 to 34.5, due to Omicron. Growth in average weekly earnings was, as a result, more tepid (+4.17% y/y).
Nevertheless, the data suggest wage pressures have broadened to sectors previously immune to big pay increases. The y/y for average hourly earnings in professional & business services did not exceed 4.0% once throughout the whole of the last decade (2010s), despite strong jobs growth. But the annual rate has broken out, accelerating to 6.86% at the start of 2022.
Another ‘barometer’ is education & health care services. Hourly earnings in this industry ($31.31) are broadly similar to the economy-wide average ($31.63). The y/y rate climbed back up to 6.82% in January. Health care and education are very labour intensive. The pandemic has afforded every opportunity to improve productivity through telehealth and online learning. But it would seem reasonable that the PCE prints for these key services in H1 this year respond to higher labour costs.
