Got a raise? Investors wince

Workers are finally making bigger paychecks. That’s good for them but an “uh oh” for investors.

Stock prices have quadrupled since their bottom in 2009 in large part because companies are squeezing ever more profit from sales, and one big reason for that is companies’ holding the line on wages for their workers.

With the unemployment rate at its lowest level in nearly 50 years, though, the pressure is on companies to start paying their workers more. Amazon announced a minimum wage of $15 per hour last month, for example, and average hourly wages across the economy rose last month at the strongest pace since 2009.

Higher wages raise a couple concerns for investors. First, it could erode companies’ profit margins. Second, it could feed into higher inflation; which would push the Federal Reserve to get more aggressive about raising interest rates and slowing the economy.

It’s certainly on the radar for corporate executives, who have been talking about the upward pressure on wages in the conference calls following their third-quarter earnings reports. Enough have done so in the last few weeks that Goldman Sachs highlighted the topic as one of the biggest themes of the reporting season. It cited comments from executives across industries, such as Southwest Airlines in transportation and National Oilwell Varco in energy and McDonald’s in restaurants.