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Friday, April 29, 2016

Definitive proof that wages are on the rise in America

One of the hottest topic of debate in the US economy right now is wage growth.  On Friday morning, the latest employment cost index is set to be released and economists expect it will show wages grew 0.6% in the first quarter of this year and 2% over the prior.  Deutsche Bank's Joe LaVorgna wrote in a note to clients on Thursday that plateau of ECI's post-crisis growth, "offers firsthand proof that there is little relationship between the unemployment rate and wage growth." In economics speak, LaVorgna argues that ECI data indicate the Phillips Curve — or the relationship between wages and unemployment — is dead. This is the beginning of an entirely separate, very contentious discussion. We'll let sleeping dogs lie for now.  So but the first estimate of first quarter GDP was released Thursday morning and data contained in this report showed another story on wage growth.  The following chart, which comes to us from George Pearkes at Bespoke Investment Group, shows the share of GDP paid to American workers in the first quarter. This ratio hit the highest levels since the recession and compensation paid to employees as a share of GDP is now on a clear uptrend.  [wages]FRED Back in March, George and the team at Bespoke wrote a great note on the state of corporate profits in America. In short, profits have been near the upper-limit of their historical range for all of the post-crisis period, and with a dwindling supply of available labor and new laws requiring higher minimum wages starting to really take effect, we seem to be on the cusp of major change in corporate behaviors and results.  And while things like tax structures and the industries in which many of America's biggest corporates now compete have some impact on why margins have been so high, labor costs appear to be at an inflection point.  Thursday's continued signs of an uptick in labor's share of GDP is unlikely to be the last of its kind.  NOW WATCH: FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy


READ THE ORIGINAL POST AT www.businessinsider.com