January’s larger-than-expected increase of U.S. hourly earnings stirred up concerns about the return of inflation. As the thinking goes, firms will pass on to consumers the higher costs brought by rising wages. But if history is any guide, firms could instead choose to limit price increases to remain competitive amidst global competition, and control overall costs with technology and automation. As today’s Hot Chart shows, the pass-through of wage growth to core U.S. inflation was negligible over the last 25 years or so, a period that coincided with an intensification of globalization.
** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **