The BLS released their economic cost index summary yesterday and it shows that wage inflation is still climbing aggressively. In a world where most firms give 2% to 3% raises, for 2022, the compensation costs have been boiling at 5% for the year so far.
Compensation costs for civilian workers increased 1.2 percent, seasonally adjusted, for the 3-month period ending in September 2022, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 1.3 percent and benefit costs increased 1.0 percent from June 2022. Compensation costs for civilian workers increased 5.0 percent for the 12-month period ending in September 2022 and increased 3.7 percent in September 2021. Wages and salaries increased 5.1 percent for the 12-month period ending in September 2022 and increased 4.2 percent for the 12-month period ending in September 2021. Benefit costs increased 4.9 percent over the year and increased 2.5 percent for the 12-month period ending in September 2021. Compensation costs for private industry workers increased 5.2 percent over the year. In September 2021, the increase was 4.1 percent. Wages and salaries increased 5.2 percent for the 12-month period ending in September 2022 and increased 4.6 percent in September 2021. The cost of benefits increased 5.0 percent for the 12-month period ending in September 2022 and increased 2.6 percent in September 2021. Inflation-adjusted (constant dollar) private wages and salaries declined 2.7 percent for the 12 months ending September 2022. Inflation-adjusted benefit costs in the private sector declined 3.0 percent over that same period.
These wage costs have happened during a period that the Fed has been hiking interest rates. The Fed is scheduled to meet next Wednesday November 2 and likely vote to increase by 75 basis points to try to tame inflation. With the stock market rally yesterday and growth in GDP last quarter, it doesn’t seem like there are any reasons for the Fed to not hike. We would argue the Fed has enough data to hike again in December!
The good news is T-Bills and Treasurys will get a boost and we’ll be buying more T-bills until we get better clarity that inflation is under control and the Fed will stop rate hikes.
In the meantime stay tuned and stay solvent…