Average hourly wage (m/m) is an economic indicator that measures the change in average hourly wages for workers over months. This indicator is one of the key metrics used by economists, policymakers, and investors to measure wage inflation and monitor overall economic health. Here are the important points about this indicator:
Definition and calculation: Average hourly earnings track how much workers are paid per hour worked. This index covers all workers and sectors, providing us with a comprehensive view of wage trends..
Month-on-month change: The indicator measures the percentage change in average hourly pay compared to the previous month. For example, if the median hourly wage was $25 in January and rose to $25.50 in February, the monthly change would be 2%.
Important: A rise in average hourly earnings indicates increased wage inflation, which can lead to higher headline inflation when employers transfer high labor costs to consumers through price increases. Higher wages generally increase workers’ disposable incomes, boosting consumer spending and contributing to economic growth..
Impact on monetary policy: Financial and economic policymakers, such as central banks, carefully monitor average hourly earnings. Large increases in average pay could prompt central banks to raise interest rates to curb inflation, while a recession or decline may call for lower interest rates to stimulate the economy..
Factors affecting average hourly wages: Average hourly wages are influenced by several factors, including labor market conditions, unemployment rates, changes in minimum wage laws, productivity level, and inflation rates.
In summary, average hourly earnings (m/m) is an indicator that measures the change in the average hourly wage paid to workers. This indicator is important for monitoring wage inflation and the health of the economy in general.
Gabin’s expectations for job and wage increases and their effects in April
The expected performance of the US employment sector for April, predicted that nonfarm payrolls will see an increase of 250,000, representing a slight slowdown from the average increase of 276,000 over the previous three months.
This represents a view slightly higher than the consensus, with the average economist expecting nonfarm payrolls to reach 243,000 in April.
Government jobs gains are expected to show an increase of 50,000 jobs, while the private sector is expected to increase by 200,000 jobs. In the broader context, Gabin explained that employment growth “was driven by the state, local government, healthcare, education, leisure and hospitality sectors.”
On the subject of overall wage growth, there has recently been a slowdown to around 0.3% m/m, bringing the rate down year-on-year to 4.1% in March from previous highs.
However, Gabin predicted a temporary reversal of the trend in April, saying average hourly earnings could see a monthly increase of 0.4% or a year-on-year increase of 4.2%. This was significantly higher than the agreed forecast which expected a rise of 0.3% m/m and 4.1% y/y.
An important factor that influenced these expectations was the recent implementation of California’s new minimum wage law, which set the hourly wage for fast food workers at $20.
The legislative change was expected to affect about 550,000 employees, or 0.4 percent of private payrolls nationwide and 3.6 percent of California employment.
Gabin stressed that the adjustment could raise average hourly earnings and potentially raise concerns about inflationary pressures within financial markets.
With the unemployment rate expected to remain stable at 3.8 percent and the participation rate stable at 62.7 percent, Gabin interpreted these figures as an indication of an economy that has revised employment expectations, possibly due to increased immigration that has pushed the employment rate to about 250,000.
May Report: Employment Growth and Stable U.S. Unemployment
According to data from the U.S. Bureau of Labor Statistics, total nonfarm payrolls rose by 272,000 jobs in May. The unemployment rate was 4.0%, with 6.6 million unemployed. The report indicates continued employment and growth in many industries, such as healthcare, government, leisure and hospitality, and vocational, scientific and technical services..
In terms of age and demographic groups, unemployment rates recorded little change, with unemployment among adult men 3.8%, adult women 3.4%, adolescents 12.3%, white people 3.5%, black people 6.1%, people of Asian descent 3.4%, and people of Hispanic or Hispanic descent 5.0%..
The report also notes that the number of people who are unemployed for a long time, i.e. for 27 weeks or more, reached 1.4 million, constituting 20.7% of the total unemployed..
The labor force participation rate was 62.5% and the employment-to-population ratio was 60.1%, and these measures were little changed in May..
The number of people working part-time for economic reasons stood at 4.4 million in May, little changed..
Finally, the number of people who want to get a job but are currently unavailable to work is 5.7 million, and that number has not changed much either.
Part-time employment rose by 62,000 (+1.7%) in May, while full-time employment declined (-36,000; -0.2%). On a year-over-year basis, part-time employment (+3.8%; +140,000) increased faster than full-time employment (+1.6%; +263,000).
Gabin stressed that the adjustment could raise average hourly earnings and potentially raise concerns about inflationary pressures within financial markets.
