U.S. wage growth likely to have accelerated slightly in Q4 2016

The U.S. wage growth is likely to have accelerated slightly in the fourth quarter of 2016. According to a Societe Generale research report, the ECI might have risen 0.6 percent, matching readings recorded in the earlier three quarters. But salaries and wages might have recorded a 0.7 percent rise that might stimulate the year-on-year rate for wages to 2.6 percent, the most rapid pace of growth since the fourth quarter 2008.

On a sequential basis, average hourly earnings rose 0.7 percent in the fourth quarter, indicating towards a rebound in the corresponding ECI measure from the third quarter’s 0.5 percent rise. Average hourly earnings are not a perfect predictor of how the ECI’s wage measure would change. But the quarterly change in the ECI’s wage component nearly mirrored that in average hourly earnings in the four quarters from the third quarter of 2015 to the second quarter of 2016.

In the third quarter, the 0.48 percent rise in the ECI’s wage index trailed the average hourly earnings rise of 0.68 percent. But in the few cases when the spread has been 20 basis points of more, the ECI’s wage index caught up in the following quarter, with the average spread at just four basis points. Therefore the ECI’s wage index might have risen 0.7 percent.

“Benefits may have advanced by 0.6 percent, in line with the recent trend, which would result in the yoy rate edging down from 2.3 percent to 2.2 percent”, added Societe Generale.