Registered Investment Adviser Caleb Lawrence
The major averages enter the final hour with solid gains on little significant news and another round of geo political tension. Though the trade war rhetoric seems to be fading into the background.
The April Consumer Price Index or CPI gained a less than expected .2%. On a year ago basis the CPI is up 2.4%, a figure unchanged from the previous month. Goods prices fell again in April, while energy prices continue to be the primary driver of the various inflation measuring indexes.
The latest Real Hourly Earnings report from the Bureau of Labor Statistics or BLS shows that once again wages are failing to keep up with inflation despite an ostensibly very tight labor market, that should be putting significant upward pressure on wages. Over the last 12-month real wages have increased just .2% and have gone nowhere for 11 months on average. While this certainly isn’t new and in fact real wages are essentially unchanged since the late 90’s. The closer one looks at wage data the uglier it gets as what little growth has occurred, the vast majority of it has accrued to the top 10%. If you break wage growth data into quintiles, the further down the socio-economic ladder you go the worse it gets with outright wage declines becoming increasingly common. This series also exemplifies another recent and increasingly widespread trend the systematic breakdown in long term data series relationships, in this case tight labor markets lead to higher wages, aka the Phillips Curve.