Sign up for our daily briefing
Make your busy days simpler with the Axios AM and PM newsletters. Catch up on what's new and why it matters in just 5 minutes.
Catch up on the day's biggest business stories
Subscribe to the Axios Closer newsletter for insights into the day’s business news and trends and why they matter.
Sign up for Axios Pro Rata
Dive into the world of dealmakers across VC, PE and M&A with Axios Pro Rata. Delivered daily to your inbox by Dan Primack and Kia Kokalitcheva.
Sports news worthy of your time
Binge on the stats and stories that drive the sports world with the Axios Sports newsletter. Sign up for free.
Tech news worthy of your time
Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.
Get the inside stories
Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Want a daily digest of the top Denver news?
Get a daily digest of the most important stories affecting your hometown with Axios Denver
Want a daily digest of the top Des Moines news?
Get a daily digest of the most important stories affecting your hometown with the Axios Des Moines newsletter.
Want a daily digest of the top Twin Cities news?
Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities
Want a daily digest of the top Tampa Bay news?
Get a daily digest of the most important stories affecting your hometown with the Axios Tampa Bay newsletter.
Want a daily digest of the top Charlotte news?
Get a daily digest of the most important stories affecting your hometown with Axios Charlotte
Want a daily digest of the top Nashville news?
Get a daily digest of the most important stories affecting your hometown with the Axios Nashville newsletter.
Want a daily digest of the top Columbus news?
Get a daily digest of the most important stories affecting your hometown with the Axios Columbus newsletter.
Want a daily digest of the top Dallas news?
Get a daily digest of the most important stories affecting your hometown with the Axios Dallas newsletter.
Want a daily digest of the top Austin news?
Get a daily digest of the most important stories affecting your hometown with the Axios Austin newsletter.
Want a daily digest of the top Atlanta news?
Get a daily digest of the most important stories affecting your hometown with the Axios Atlanta newsletter.
Want a daily digest of the top Philadelphia news?
Get a daily digest of the most important stories affecting your hometown with the Axios Philadelphia newsletter.
Want a daily digest of the top Chicago news?
Get a daily digest of the most important stories affecting your hometown with the Axios Chicago newsletter.
Sign up for Axios NW Arkansas
Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters
Want a daily digest of the top DC news?
Get a daily digest of the most important stories affecting your hometown with the Axios DC newsletter.
Illustration: Rebecca Zisser/Axios
A growing number of U.S. companies are saying higher wages weighed on first quarter profits or will have a negative impact in coming quarters.
Why it matters: As workers finally start to see pay increases, one of the biggest drivers of high profit margins is under threat and Bridgewater, the world's largest hedge fund, warns corporate profits that have fueled the stock market boom may be peaking.
In the last 20 years union membership dropped and companies have had access "to pools of cheaper foreign labor and advancing automation technology," Bridgewater writes — all factors that have contributed to stagnant wage growth.
- The economic boom has started to shift the balance of power in favor of workers. Unemployment is close to a half-century low and companies will need to up pay to attract would-be employers.
- Higher wages haven't hit all-time high profit margins yet, as we've reported. "U.S. corporate profits as a percent of GDP averaged about 8% in the 20 years leading up to 2000, but have since risen by almost 30%, averaging 10.5%," according to Jim Paulsen, chief investment strategist at The Leuthold Group.
But here's what executives are saying, via earnings calls this quarter:
- "It still feels like to us that there is ... more wage pressure than there has historically been," AutoZone CEO Bill Rhodes said.
- "FedEx Ground operating results were negatively impacted by the inflationary impact of the tight labor market on our purchase transportation rates and employee wages," FedEx CFO Alan Graf said.
What to watch: The big question is whether companies can continue "to absorb higher wage bills without raising prices," as as Bloomberg's Matt Boesler points out. That could help even out profit margins.
- That hasn't happened yet. We haven't seen a significant pick-up in inflation, bolstering the Fed's case to hold off on hiking interest rates and maybe even cut rates.
Go deeper: