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Signs that American workers are winning
[NEW YORK] A bevy of labour market indicators are all saying the same thing: There aren't a lot of Americans looking for work, so those with jobs are starting to reap the benefit in the form of higher wages.
In a note to clients, Macquarie Capital Markets Ltd Economist David Doyle highlights the growing pile of evidence that wage growth is "picking up steam".
In September, the annual growth in average hourly earnings of production and non-supervisory workers reached its highest level in more than six years.
Wage growth has been much more robust, on average, in states that don't produce a lot of oil, a drag on the headline figure that the analyst thinks will eventually abate.
At the sector level, strength is broadening. Almost 45 per cent of sub-industries are showing wage gains in excess of 3 per cent, a share that's up more than 20 percentage points from its trough this cycle.
And in two key cyclically-sensitive industries - construction and manufacturing - wage growth has been on fire.
These figures may actually understate the magnitude of wage gains, thanks to the changing composition of the labour market: baby boomers exiting, millennials joining.
An alternative measure of wage growth developed by the Atlanta Fed, which tracks the income outcomes of select individuals over time, shows a much firmer pace of pay growth.
But Mr Doyle notes that even this indicator may not fully reflect recent upward wage pressures, since it's only a three-month average.
"The unsmoothed September number has shown an even more substantial pick-up to 4.2 per cent year-over-year, its highest level in nine years," he writes.
More evidence of the solid US labour market: In September, the share of respondents to the Conference Board's monthly survey who report that jobs are plentiful, minus the percentage of those who say jobs are hard to get, hit its highest level since 2007.
This measure has tended to have an inverse correlation with the unemployment rate over time.
The fundamentals for wage growth are further buoyed by a relative dearth of available workers. There are only 1.44 unemployed Americans in the labour force per job opening, a ratio on par with last cycle's trough.
"Improving wage growth is a key factor underpinning our views of i) the return of a healthy and benign inflation, ii) continued expansion and persistent gains in consumer spending, iii) three FOMC rate hikes before end-2017, and iv) a continued back-up in the 10-year Treasury yield (our forecast is 2.3 per cent at end-17)," concludes Mr Doyle.