Sign-up bonuses for truck drivers in Detroit, Michigan, of between US$10,000 and US$20,000, alongside an increase in people quitting their jobs, show the US recovery is continuing. When it comes to informing monetary policy, Federal Reserve chairwoman, Janet Yellen, pays close attention to the Employment Cost Index (ECI) which tracks wage growth. According to the most recent data from the US Labour Department, compensation costs rose 2.2% over the 12-month period ended December 2014.
We prefer to watch the National Federation of Independent Business’ (NFIB) Small Business Optimism Index, as we believe it is illustrative of the larger picture. This index surveys the intentions of smaller businesses in relation to worker compensation over the next six months and is currently indicating the ECI could be poised to rise more than 3% in the coming months.
Why do you think small business owners are preparing to give wage increases? Is it because they are philanthropic? No, it is because they are struggling to find the right candidates and are offering more to try and attract them. Their number one problem is finding attractive candidates, and even in lower-skilled jobs, like mass-merchandise retail, some of the largest US employers are raising wages. This will be supportive of consumer spending going forward and sectors such as tech are likely beneficiaries.
Dave Daglio – The Boston Company Asset Management, A BNY Mellon company