Fed expects US wage growth to slow “widely”

The Federal Reserve (Fed) estimated this Wednesday that during the second half of the year there will be a slowdown in wages in the United States due to high labor costs, largely derived from the rate hikes carried out by the regulator to lower prices.

“Wage growth will slow broadly in the near term”, affirmed the US central bank in its ‘Beige Book’, a document in which it collects recent information on the country’s economy.

“Growth in labor cost pressures was high in most districts and often exceeded expectations in the first half of the year”, said the regulatory bank, which prepares this analysis with information provided by the different regional Federal Reserves.

In this case, the data collected in the last two months are analyzed, in which employment growth “it was moderateacross the country, the Fed notes, with a slowdown in hiring.

According to official data from the Bureau of Labor Statistics (BLS), job creation in recent months has slowed. In August, 187,000 jobs were created, data that is below the average of the last twelve months, 271,000.

In addition, the unemployment rate rose three tenths in August and stood at 3.8%, a figure that is still very low, although the rise is a reflection of the eleven consecutive interest rate hikes that the Fed has carried out since March 2022.

Although hiring slowed down, says the fed In the beige book, most districts indicated that labor market imbalances persisted, as the availability of skilled workers and the number of applicants remained limited.

The Federal Reserve also does a price analysis and estimated that in most districts price growth slowed overall, especially in the manufacturing and consumer goods sectors.

In most regions, economic growth was modest during July and August, and although consumer spending on tourism was higher than expected, other retail spending continued to slow, especially on non-essential items.

This suggests that “consumers may have exhausted their savings and are relying more on loans to support spending”.

The Federal Reserve will hold its next meeting on September 19 and 20, in which it will decide whether to continue raising rates or whether to pause.

Source: EFE