Slower US wage growth in December may point to 25bp Fed hike, Barclays says
US central bank survey data published the day before suggested that wage growth decelerated "notably" at the end of 2022.
The Federal Reserve Bank of Atlanta's Fed Wage Tracker's year-on-year rate of increase slowed from 6.5% for November to 5.5% in December in unweighted terms - the second largest drop going back to 1983.
"The tracker is particularly informative because it controls for differences in skill levels, using microdata from the household survey to compare wages of the same person to reported wages twelve months earlier," economists at Barclays Research said in a report sent to clients overnight.
"This is unlike average hourly earnings which do not adjust for composition."
The data shifted the balance further in the direction of a 25 basis point interest rate hike by the Fed at its next meeting, they added.
"In our view, the Fed's upcoming decision will be sensitive to views about underlying pressures on service prices from the tight labor market.
"Today's estimates provide much more concrete evidence that wages are decelerating, despite hard data that continue to point to robust labor demand."
As an aside, while the year-on-year rate of increase in US CPI had come off by about 40% from its peak, core CPI remained near its highs, although it had flattened out.