Will US Average Earnings Increase Following the Increase in Labour Unit Costs Yesterday?

Earnings have been slow to increase in the US, lagging behind the rest of the economy as the average hourly earnings index indicator has shown. They posted a decent increase of 0.4% in December, but that should have been affected/skewed by the year-end bonuses because the pace of growth fell to 0.1% in January.

Although, the revised unit labor costs for Q4 which were released yesterday showed a 2% increase for that period which was above expectations. Today, we have a round of important economic data coming out of the US later in the afternoon which includes the unemployment rate, non-farm employment change and the average hourly earnings.

Yes, the pace of the increase in average earnings declined to just 0.1% for January but it is expected to have picked up again in February and increase by 0.3%. That would give the USD a boost, especially if earnings come higher because they are the slowest to improve during this economic expansion in the US.

That would also improve the sentiment in financial markets since it would translate into stronger demand from the US consumer this month, but let’s not make too many plans in advance while we wait for the report to be published.