The market is closely watching the Average Hourly Earnings (m/m) report, expected to show a 0.3% increase this month, down from 0.4% in the previous reading. This indicator is considered one of the key measures of the U.S. labor market, as it reflects changes in workers' hourly income, which directly impacts consumer spending and overall economic strength.
For the U.S. Federal Reserve (Fed), slower wage growth (0.3% vs. 0.4%) signals easing inflationary pressure, which may reduce the likelihood of further interest rate hikes and give the Fed more flexibility in its monetary policy decisions.
How does Jerome Powell benefit from the Average Hourly Earnings report? This report is a crucial tool used by Jerome Powell, the Chair of the Federal Reserve, to assess the health of the U.S. economy and labor market. Rising wages are often seen as a sign of hidden inflationary pressure, as higher income leads to increased consumer spending, which can push prices higher, even if raw material prices remain stable.
On the other hand, stable or slowing wage growth indicates a cooling labor market. Powell may view this as a sign that the economy is gradually slowing down, giving him room to ease the pace of monetary tightening or consider holding interest rates steady in upcoming meetings.
