US Jobs Market Remains Under Stress

Companies are going to be reluctant to raise actual wage rates, which are a permanent move, with a likely preference to “bonus” payments for turning up. This is still going to push up costs with the employment cost index already having hit a 15-year high in the first quarter of this year. We also expect to see companies asking staff to work longer hours, which means more overtime payments and more costs.

Inflation risks more and more on the upside

Consequently, we may not see particularly strong gains in jobs over the next few month, with the bigger improvements seen later in the year as the labour supply strains ease. However, workers are likely to benefit financially due to the competition for staff. This of course is yet another additional cost for business and in an environment of vigorous, stimulus-fueled demand companies are in a decent position to pass these extra costs on to customers.

Once again, the implication is that inflation is likely to stay higher for longer, which we suspect will soon force the Federal Reserve to shift away from its ultra dovish position on leaving interest rates on hold until 2024.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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