What's going on?

After a long time of thin back pockets, a report from the US government released on Friday showed that wages in September grew the most in almost eight years.

What does this mean?

Despite some job losses related to last month�s hurricanes, the big news in Friday�s job report was that American wages in September had grown by 2.9% compared to one year ago. On top of that, wage growth figures previously reported in July and August were revised to be even greater, meaning that wages have been on a definite upward path this summer! Employers are needing to spend more on wages to fill up their job vacancies, which is a sign of a healthy economy.

Why should I care?

For markets: If wage growth pushes up inflation, the Federal Reserve could raise interest rates � possibly making stocks and bonds vulnerable.


Since higher interest rates make borrowing more expensive, they can be used to cool spending and, thus, inflation. But they can also push down the value of stocks if businesses are unable to cope with the rate increases (e.g. companies might not be willing to expand their businesses, and/or might be earning less profits, if it costs a lot more to take out a loan). Interest rate hikes can also be bad in the short term for bonds, as investors would prefer to wait for higher returns before buying them.

The bigger picture: Developed economies around the world are all doing fairly well (with one exception).


The economy is on the mend in Europe, and other developed economies like Japan and Canada are doing reasonably well too. That said, the UK economy has had a rougher go of things; while unemployment is at an historic low, the economy isn�t growing as much as its immediate peers, especially with uncertainty around Brexit making spending and investing less attractive.