Some economists worry that workers are losing ground, as wage gains slipped to 2.9% on an annualized basis.
“There are two implications. It takes some of the pressure off profit margins for companies, but it’s healthy enough to help consumers feel like they can go out and spend,” said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute — although he added that further deceleration could undermine consumer confidence and lead to a cutback in spending.
Jeff Mills, chief investment officer of Bryn Mawr Trust, offered a silver lining to slowing wage growth: It suggests monetary policy will remain accommodative this year. “It underscores an inflation backdrop that remains pretty benign. It’s unlikely to provoke tightening by the Federal Reserve,” he said.
With capital investment at a trough as corporate executives wait out the uncertain outcome of Trump’s trade policies, the U.S. economy has been dependent on robust consumer spending for continued momentum. A sharp or sustained drop in that activity would mark an economic inflection point, economists said.
Samana also noted that the average hourly workweek has ticked lower from a year ago, a potentially bad sign. In the absence of robust wage gains, a shorter workweek translates into lower take-home pay and less disposable income in the average American pocketbook.
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