Richest economies enjoy biggest pay rise in a decade
Workers in the world’s richest countries are getting their biggest pay bump in a decade, a step toward solving a labor market puzzle that’s unnerving central bankers.
As shrinking unemployment in the US, Japan and euro zone finally forces companies to lift wages to retain and attract staff, JPMorgan Chase & Co reckons pay growth in advanced economies hit 2.5 per cent in the second quarter, the most since the eve of 2009’s worldwide recession.
The bank predicts wages will accelerate to near 3 per cent next year.
Fatter wallets should support global economic growth already enjoying its best upswing since 2011, while encouraging central banks such as the Federal Reserve to keep tightening monetary policy before inflation takes hold. It may prove less welcome news for stock and bond prices. “It’s a good thing: you’re more confident in the sustainability of your expansion, you’re more confident that you’re going to get inflation moving up,” said Bruce Kasman, chief economist at JPMorgan in New York. “It is a signal that we’re normalising economic cycles.”
If sustained, the pickup in pay will settle a debate over whether the historical relationship between tightening labor markets and rising wages had broken down even as unemployment in developed economies fell to its lowest since 1980 by JPMorgan’s estimation.
Reasons to doubt the reliability of the Phillips Curve, an economic model created in the 1960s, include the assimilation of China and India into the global workforce.