Below is a chart all Americans who are shopping today should appreciate. It shows the year-over-year percentage change in average hourly wages minus the year-over-year change in the CPI. With the line over zero, it means wages are rising faster than the general inflation rate. This was not the case the same time last year, when inflation was still running faster than wages.
Kit Juckes at SocGen writes:
The best news for US consumers as they digest last night’s pumpkin pie and get ready for a hard day’s work in the shops (or at the computer), is that wage growth has moved back above inflation and real incomes are rising. Americans are regularly surprised to learn that real wage growth is picking up (albeit modestly). The other side of the same coin, as wages rise relative to PPI, is that the labour share of GDP will rise vs. the profit share, but on a day when the focus will be on how much is spent in the run-up to Christmas, I reckon the US is in much better shape than last year, when real wages were falling. If we get good spending news, the main effect will be felt via more steepening of the US curve, and the currencies which will suffer in the process are likely to be AUD, CAD, perhaps NZD now, and JPY.