Gains

American workers are still enjoying strong wage gains

From CNN's David Goldman

Wage growth picked up in the beginning of the year, remaining at historically strong levels not seen in pre-pandemic times.

Average hourly earnings for private workers rose by 19 cents in January, or 0.6%, to $34.55. That's a stronger monthly gain than December's 0.4% increase. From a year ago, wages were up 4.5%, down slightly from 2023's peak of 4.7%, but well above any annual wage increase on Labor Department records going back to 2007.

That means Americans might just be gaining more spending power. Inflation slowed markedly throughout 2023, not showing any signs of picking up in the final months of last year. If inflation gauges due later this month show that price hikes continued to cool in January, or simply held steady, then that's a big win for American workers who are continuing to earn more.

For the Fed, strong wage growth could make it harder to successfully defeat inflation. That's because strong wage growth points to employers' labor costs rising, and those higher costs could be passed on to consumers, but another key factor economists consider is productivity.

Wage gains can indeed be robust without stoking inflation — if productivity is keeping up. The goods new for now is that data this week showed that productivity, measured as nonfarm employee output per hour, rose at a solid 3.2% annualized rate in the fourth quarter.