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Peter Boockvar

January 31, 2023 By Peter Boockvar

Labor costs in Q4

The Employment Cost Index for Q4 rose 1% q/o/q and that was one tenth below the estimate. The private sector component is most important here and the q/o/q rise in wages and salaries was 1% vs 1.2% in Q3, 1.6% in Q2 and 1.3% in Q1. It finished 2021 at 1.1%. Versus last year, private sector wages and salaries were higher by 5.1%, the same pace seen in September. As for other benefits, like healthcare, compensation went up .7% q/o/q vs .8% in Q3, 1.3% in Q2 and 1.9% in Q1. It was .9% in Q4 2021. There were up 4.8% y/o/y.

For perspective, the y/o/y private sector rise in total compensation of 5.1% is off the peak of 5.5% in Q2 but is almost double the pace of the 19 years (as far back as the data goes) leading into Covid of 2.7%. That’s a clear change in the pace of labor costs. The question though is where does it go from here and it’s a tricky one to answer. That is because we have a two lane labor market highway, one where employers need employees on premises to do their jobs and the other where they can work from anywhere. The former has the most leverage in decades while the former are more vulnerable here in a slowing economy. I don’t know the net result in terms of aggregate wage growth.

As for the Fed, as they only have one or two more hikes left anyway, this data matters from here more so for how long they can hold out with rates at current levels in the face of a slowing economy and eventual rise in the unemployment rate. Treasury yields fell a touch further after the number.

Private Sector Compensation y/o/y in Q4

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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