In the USA the seventh year with visibly higher employment is drawing to an end. The average annual unemployment rate will probably have been only 4.4 per cent, which is the lowest figure since the year 2000. Nevertheless, wages are still rising at no more than a modest pace. Above all, the central bank has an eye on wages as strongly rising wages would very soon drive inflation higher.
Very different factors will no doubt continue to prevent strong wage growth. Ultimately this is a result of “a little bit of a lot.” First, job creation has slackened again and will probably lose some more of its momentum in the coming year as well. Second, in some areas of employment, such as in the public service and among part-time workers, wage growth rates have lagged visibly behind those seen in the pre-crisis years. The fact that, despite the slight recovery in the last few years, the trend in the number of employed in the producing industry is still tending to drift sideways is also having a dampening effect on wage growth. However, automation tends to threaten not only jobs in the producing sector, but also in some areas of the service sector. In addition, the shock caused by the wave of lay-offs during the economic and financial crisis is probably still deeply seated in many workers and managers.
In the coming quarters the high level of employment, which argues in favour of higher wages, will probably be offset by increasing automation, which tends to reduce the upside pressure on wages. Wage pressure is thus also unlikely to increase notably and the fundamental environment for inflation should remain moderate. As a result, the US central bank will also be able to take its time with any further interest-rate hikes.