Joe Biden says there is no problem with rapidly rising salaries. But they are already pushing short-term interest rates higher than long-term counterparts.
| Rapid jobs and wages growth in the US has pushed up expectations for as many as 10 0.25 percentage point rate rises this year by the Federal Reserve. It has also created a so-calledin which short-term rates become more expensive than their long-term counterparts.
The US added a further 426,000 jobs last month, said the Bureau of Labor’s report on Friday . That pushed the unemployment rate down to 3.6 per cent – just above its pre-pandemic level.Wages rose 0.4 per cent, lifting the annual growth to 5.6 per cent well above the pre-pandemic growth rate of about 3.1 per cent.“More and more American workers have real power now to do get better wages,” Mr Biden said. “… Some people see that as a problem; we’ve had this discussion in the past. I don’t.
The new pricing pushed the yield on US two-year Treasuries to 2.46 per cent above the 10-year rate of 2.37 per cent –Some market observers expect the inverted yield curve to be an indicator of a potential recession. But LPL Financial’s chief market strategist, Ryan Detrick, said the previous four times the 2/10 year yield curve inverted, the SFederal Reserve chairman Jerome Powell has called the jobs market “extremely tight”.
“Employers are having difficulties filling job openings and wages are rising at their fastest pace in many years,” Mr Powell said last month when delivering the first increase in the Fed Funds rate for three years.“[The Fed] expect the labor market to remain strong, with the median projection for the unemployment rate declining to 3.5 per cent by the end of this year.”
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