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Wage growth takes center stage

Data: Federal Reserve Bank of St. Louis; Note: Seasonally adjusted; Chart: Chris Canipe/Axios

Wage growth, up 2.9% in August from the year before, was the standout figure in Friday's jobs report.

Why it matters: For almost a decade, weak wage growth has defied the economic recovery and has bedeviled workers. Perhaps no longer, according to Joseph Song, an economist at Bank of America Merrill Lynch. Song predicts this is just the beginning of "better wage dynamics," and it could continue in coming months.

Stagnant wages had become a bit of a paradox: With falling unemployment, companies should have been trying to bid wages higher to retain talent and compete for workers. Now we're close to a wage growth rate we haven't seen in almost a decade, as 2009 was the last time paychecks grew 3% year-over-year.

  • This is another signal that the Fed — which called the lack of wage growth a "puzzle" earlier this year — will stay on track to raise rates at least once more in 2018. Maybe twice more, depending on whom you ask.
  • Wage growth was not isolated to just a few industries: Most sectors showed wages were up from prior months.
  • Workers should feel confident that if they switch jobs, they might find another gig that will pay them even more.
  • But, Song cautions, we have been "head faked" with strong wages before. Some of the uptick in wages could be revised away in coming months.