• Last Friday’s jobs report brought to the forefront long-dormant fears that inflationary pressures may finally be emerging, as average hourly earnings for all private sector employees rose at their highest annual rate since June 2009.1
  • Parsing the strong headline number, however, one can see that the wage increases were not evenly distributed across all workers. For example, wages for nonsupervisory employees, who account for approximately 82% of all employment in the U.S., remained flat in January at just 2.4% annual growth.24,25 Further, January’s nonsupervisory employees’ wages were relatively in line with the 2.3% average wage growth they saw in 2017.25
  • As some investors fret about the Fed accelerating its activity, policymakers appear confident that they will remain on a slow trajectory in raising rates.
  • John Williams, President of the Federal Reserve Bank of San Francisco, reiterated in a speech just last week that the FOMC won’t overreact in the months ahead. Williams noted that his message to those “concerned about a knee-jerk reaction from the Fed is that, as always, we’ll keep our focus on the dual mandate and let the data guide our decisions.”26

1 Bureau of Labor Statistics, average hourly earnings, http://bit.ly/2iYbHWM.
2 S&P 500 Index.
3 ICE BofAML U.S. High Yield Master II Index.
4 10-year U.S. Treasury note.
5 The Wall Street Journal, http://on.wsj.com/2BfQymx.
6 University of Michigan Surveys of Consumers, http://bit.ly/1gDEQwe. Consensus based on Bloomberg data.
7 U.S. Census Bureau, new orders for manufactured goods, http://bit.ly/2qvR2kK. Consensus based on Bloomberg data.
8 FactSet, http://bit.ly/2nLMeDJ.
9 Federal Reserve Bank of St. Louis, CBOE Volatility Index, http://bit.ly/295DSwP.
10 Bloomberg, as of February 9, 2018. Based on data from the Merrill Lynch Option Volatility Estimate (MOVE) Index.
11 Federal Reserve Bank of St. Louis, 10-year U.S. Treasury note, http://bit.ly/29ecBfp.
12 Federal Reserve Bank of St. Louis, page 15, http://bit.ly/2nXKuqD.
13 ICE BofAML U.S. Corporate Master Index.
14 U.S. Energy Information Administration, http://bit.ly/2ueQorn.
15 Thomson Reuters Lipper, based on data from J.P. Morgan High-Yield and Leveraged Loan Morning Intelligence, as of February 9, 2018.
16 Federal Reserve Bank of St. Louis, “Lessons from the Taper Tantrum,” http://bit.ly/2G0GUDr.
17 Nasdaq.com, http://bit.ly/2nMzjBz.
18 ICE BofAML U.S. High Yield BB Rated Index.
19 ICE BofAML U.S. High Yield CCC and Lower Rated Index.
20 Credit Suisse Leveraged Loan Index.
21 BB rated portion of the Credit Suisse Leveraged Loan Index.
22 B rated portion of the Credit Suisse Leveraged Loan Index.
23 CCC rated portion of the Credit Suisse Leveraged Loan Index.
24 Bureau of Labor Statistics.
25 Federal Reserve Bank of St. Louis, Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private, http://bit.ly/2seYm4S.
26 Federal Reserve Bank of San Francisco, http://bit.ly/2Et0TgU.


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