The Employment Cost Index, the premier measure of wage growth, remained at a very high level in Q3 after having reached a record high reading in the prior quarter. With wages growing at more than a +5% annual pace for the second straight quarter, there is a real possibility of a wage-price spiral developing as inflation becomes ingrained in the minds of consumers, employees, and employers. The Federal Reserve recognizes the danger posed by a wage-price spiral, and this report will help keep the Federal Reserve on a tightening path for the foreseeable future. And while the Fed is likely to raise interest rates by another 0.75% at next week’s meeting, if their rhetoric is more aggressive than expected, then equities could give up recent gains in a hurry.
Eli Petropoulos, CFA – Sr. Market Analyst
