“Employees have more leverage and employers are starting to

Why Wall Street isn’t cheering wage hikes yet

If wage hikes don’t encourage consumers to spend more something that cheap oil has so far failed to do they won’t help the stock market much. Yet higher labor costs will increase expenses on companies at canada goose outlet michigan a time canada goose kensington parka uk when they may not canada goose outlet woodbury be able to balance them out by raising prices. That’s not good for investors.”In contrast to what was seen over the past six years, what could be good now https://www.canadagooseoutletcanada.ca for Main Street may not be so for Wall Street,” said Peter Boockvar, chief market strategist at The Lindsey Group.Related: McDonald’s is giving canada goose outlet sale 90,000 workers a raiseFinally! Pay canada goose outlet in montreal raises are coming: American workers haven’t had as much to celebrate during the economic recovery as investors. While the stock market has shattered records, wages canada goose outlet jackets have barely grown compared with the economy and inflation. canada goose outlet orlando economy is at the lowest level since 1948, according to the Bureau of Economic Analysis.Yet now the labor market has improved enough that at least some large companies are fighting to keep talent by slowly increasing pay. Earlier this week McDonald’s canada goose outlet store montreal revealed plans to boost hourly wages by more than 10% for roughly 90,000 workers.”Employees have more leverage and employers are starting to respond,” said Boockvar. “The pendulum of wages relative to profits swung way too far in one direction. growth forecast to zeroMargin destruction ahead? The shift in the labor market has a negative implication for profit margins, a measure of corporate efficiency that has climbed to high levels thanks in part to stagnant wages. High margins have in turn helped lift stock prices.Of course, not all companies will feel the margin pressure. canada goose outlet vip Only the ones employing large amounts of low wage workers.Also, it’s pretty normal at this stage of the economic cycle to see margins take a breather. browse around this website There are only so many costs companies can squeeze.Companies will naturally try to offset the higher costs by raising prices on products. Yet canada goose jacket outlet uk it’s not clear canada goose outlet black friday sale they will have the pricing power to pass these costs on to consumers.Just look at consumer spending. It inched up just 0.1% in February following two months of outright declines. Even cheap gasoline hasn’r perked up canada goose outlet shop spending. Many Americans seem to be hoarding the $750 canada goose outlet eu they will save from cheap gas this year rather than spending it.”This time we may see a heavier deterioration of margins than we normally would at this point in the cycle,” said canada goose outlet reviews Bruce McCain, who helps oversee more than $20 billion as chief investment canada goose outlet london strategist at Cleveland’s Key Private Bank, a division of KeyCorp.Related: The wild ride in stocks isn’t overWage hikes could lead to Fed rate hikes: If companies are able to boost prices that would be good canada goose outlet parka news for the canada goose outlet toronto Federal Reserve, which is failing to hit its 2% inflation target. The Fed is in no rush to raise rates canada goose outlet seattle until it’s confident inflation will improve to healthier levels.But investors get nervous about anything that speeds up the timetable or the pace of interest rate hikes. That’s because extremely low rates make risky assets like stocks canada goose outlet uk look that much more attractive.Related: Stock market risks may be risingConsumer spending is the key: Of course, there is a way for both Main Street and Wall Street to come out as winners from the wage hike story. If higher pay triggers a meaningful boost in spending, that would be huge for the stock market as well as the economy, which still takes its cues from consumers.Wage hikes “are not a positive for corporate earnings in the near term, but they could have the potential of fueling further expansion in terms of consumer spending,” said Peter Kenny, canada goose vest outlet chief market strategist at The Clearpool Group.

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