Falling Real Wage Growth Could Pose Big Problems
Rising inflation and stagnant wage growth are combining to reduce consumer spending power.
Our focus this week is on the employment report, which was disappointing yet consistent with relatively slow GDP growth. In fact, we won't be changing or full-year employment growth rate or GDP forecast of 1.75%-2.0%.
Still, first-quarter GDP growth will now be lucky to hit our 1% target. Furthermore, we still worry deeply that hourly wage growth is not accelerating more in light of the gains in inflation and at least some worker shortages. Vehicle sales for March were disappointing, too, and will likely hurt first-quarter GDP growth.