Portrait of the Market
As we are probably all well-aware, over the past year or so, inflation and its expected future direction has been a (if not the) key stock and bond market driver. As a result, there's significant renewed interest in the financial media to distill and interpret the "headline inflation" number in more complex ways in order to divine how this mysterious force is evolving.
Some of the questions these media posts have raised are: (1) Are there areas that had an outsized impact during the pandemic but should wane or are waning? (e.g. lumber, shipping costs) ;(2) What are the current differences between goods and services inflation and how are each trending?; and (3) Does the inflation calculation done by the Bureau of Labor Statistics (BLS) truly reflect the on-the-ground reality of what individuals or the economy are actually experiencing (e.g. does the treatment of equivalent rent for homeowners make sense)?
In the chart today, we're focused on that 3rd category. In this case, the job board website, Indeed, has utilized its vast database of job postings with wage descriptions to develop their own Indeed Wage Tracker as a measurement of wage growth over time. As you can see, it appears that wage growth may have peaked even before the Federal Reserve began its rate hiking cycle in March 2022. This appears to be solid evidence that the so-called “wage-price spiral” (higher wages leading to higher prices from increased spending and then higher wages from higher prices) is currently being held in check. As long as wages trend down, we feel that we should continue to see inflation trend downward. It’s still early days, but data from November going forward appear to reflect this move. Nevertheless, we are still doubtful that inflation will reach the Federal Reserve’s 2% target anytime soon.
Going forward, we will try to highlight additional unconventional methods of tracking inflation that we find to be useful points or counterpoints to the usual sole focus on government data.
This material is provided for informational purposes only and is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change at any time without notice. The information and opinions contained in this material are derived from proprietary and nonproprietary sources we deemed to be reliable and are not necessarily all-inclusive. All investing involves risk, including the possible loss of principal.
