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Elliot Clarke, Research Analyst at Westpac, suggests that the June employment report and CPI report collectively highlighted the financially constrained state of the US consumer.

Key Quotes

“The primary restraint for consumption evident in the data is an absence of real wage gains. In the June quarter, annual real hourly earnings growth came in at just 0.1%yr. As hours worked are also unchanged over the period (indeed since 2014), the established worker is yet to see a meaningful benefit from the post-GFC recovery.”

“Technology and globalisation are at play here; however, the domestic supply of labour still returning to work 10 years after the GFC is arguably the major impediment to accelerating wage inflation.”

“Employers won’t be forced to boost pay and conditions to attract workers for a while yet, with at least another year of strong employment growth necessary to erode remaining slack.”