From Osaka to Frankfurt, listless wages remain G-7 mystery

UNEMPLOYMENT is falling almost everywhere. Wages aren’t rising much anywhere.

From York, England, to Montreal, and Osaka, Japan, to Seattle, it’s a pretty good time to be looking for a job as a member of the labour force in many developed countries.

Unemployment rates in Group of seven nations such as Canada, the US, Britain, Japan and Germany are nearing or even slightly below what officials describe as a maxed- out jobs market.

But wage gains worldwide have been only creeping along. For developed economies, that means the powerful cycle of higher compensation fuelling stronger demand and then business investment and, eventually, a little more pricing power, has proven elusive.

“It is a mystery,” said Torsten Slok, chief international economist at Deutsche Bank. “We’re barely seeing any wage growth.”

Solving this puzzle matters, since it casts uncertainty over the health of the world’s labour markets and the direction of monetary policy. Central banks, which are supposed to tune their policy rates to inflation, could end up tightening too fast too soon if they conclude employment gains mean inflation is right around the corner. Or if they focus on the weak wage gains, they may end up leaving rates too low for too long, fuelling asset bubbles.

US Federal Reserve officials conclude their meeting on Wednesday and markets are pricing in a quarter-point rate hike as part of a gradual normalisation of rates from crisis lows. —