Recap of Today’s Economic Data

There was a significant amount of economic data released today in advance of the Christmas holiday. There were no major surprises with 3 data points missing consensus, 2 came in at consensus and 1 exceeded consensus. The 3 missed were by a slim margin. The markets are mostly flat on the news.

Typically headlines focus on year-over-year (Y/Y) and (or) month-over-month (M/M) changes. While this is an important view I also like to consider the absolute level. I will do so in the following charts.

Personal Income, Employment Cost and Implications for Inflation

Monday morning, Rosenberg, in his eponymously named economic commentary “Breakfast with Dave”, continues to point out that deflation is a bigger risk currently than inflation. He states,

There is no more significant source of inflation than the U.S. labour market and we found out on Friday that total employment costs slowed to just +0.4% in Q3 and the YoY trend is extremely tame, at +1.9%. Wages came in at +0.3% sequentially and just +1.5% on a YoY basis.

By examining today’s Personal Income and Outlays data and Friday’s Employment Compensation data (cited by Rosenberg) let’s see what they are indicating about inflation.

First of quick summary of the two reports; As of Q3’10, quarter over quarter growth rate in Employment Compensation has slowed to .4% from .5% and .6% in the prior two quarters. Consensus for Q3 was .5%. Wages and Salary quarter over quarter % change was .45%. It has remained in a tight range, from .36%-.45% from the past 5 quarters. There continues to be no strong rebound in wage increases with employment costs remaining under 2% year over year.

 

Click to Enlarge