Monday, August 19, 2013

Research: Drop in Jobless Claims suggests pickup in Wage Growth

by Bill McBride on 8/19/2013 01:10:00 PM

Fast FT has an excerpt from a Deutsche Bank research note: US jobless claims hold signs for the second half

So far, rises in wages and salaries have barely been able to outpace the combined effect of inflation and the higher payroll tax introduced at the start of the year.

Deutsche expects that could change:
If the recent four-week average (332,000) on claims is sustained over the entirety of the third quarter, this should be consistent with an acceleration in wages and salary income toward 5.7% by yearend—which would significantly outpace the drag from inflation and the payroll tax
excerpt with permission
The following graph is from the research note. This shows that the year-over-year change in weekly unemployment claims (inverted) typically leads wage growth. However, I think wage growth will remain sluggish with the high unemployment rate.
Jobless Claims vs. Wage Growth