Daily Commentary BY THE CURVE TEAM –

Wages Show A Little Life

20th of May, 2021

Wages for Q1 showed evidence of a slight recovery from recent lows.

A rise of 0.6% for Q1 was recorded was slightly higher than the 0.5% expected by the market. This leaves annual growth at 1.5% which is off the recent lows but still well below the long run average.

The final groups receiving the Fair Work minimum wage rises were part of the Q1 growth. Wage freezes and delayed rises which have since been re booted also contributed to the rise.

Sectors hardest hit by covid saw the largest gains, with accommodation and food services up 1.5% for the quarter. Retail was also up 0.8%.

However, none of these sectors hit hardest by covid see wages growing by more than 2.5% for the year. This supports business surveys which shows prices and wages are lagging surges in conditions and confidence.

Also overnight, the recent Fed meeting minutes included some members bringing up early tapering of QE. Although the central view of the Fed is to maintain QE indefinitely, at the margins there are considerations to unwind this.

As a result, 10-year treasury yields jumped 5 points overnight. Previous market updates, such as inflation, saw similar jumps in Treasury yields which since retraced back to their pre announcement levels. It will be interesting to see whether the jump overnight is sustained or temporary.

Josh Stewart

Associate - Money Markets