Line chart showing year-over-year wage growth from January 2010 to November 2023. Wage growth started around 1.6%, and has moved upward since, with a notable acceleration post-pandemic. The pre-pandemic growth was around 3.5%. In November 2023 the wage growth was 5.2%.
Line chart showing capital spending plans vs real capital equipment order from January 2019 to November 2023. Capital spending plans decreased into the negative territory after the start of the pandemic but have mostly recovered since. They have decreased in recent months. Real capital equipment orders seesawed after the start of the pandemic but have stabilized since.
Line chart showing job growth and the ratio of compensation to corporate income from January 1980 to December 2023. Compensation to corporate income data is as of September 2023. With some exceptions, when the ratio of compensation to corporate income is highest, job growth declines. Compensation peaks in the late 1980s-early 1990s of about .65 were accompanied by low job growth of about -1%. Since the 2008 recession, the compensation/corporate income ratio has been relatively low (0.56 – 0.58) and job growth increased dramatically from near -5% to roughly 1.5% (by 2012). As of December 2023, job growth was 1.8%. As of September 2023, the compensation to corporate income ratio was 0.57.
Line chart showing the unemployment rate for four different education levels from January 2010 to December 2023. The unemployment rates for the education levels generally move up and down together and stay in the order of highest unemployment to lowest unemployment in the following order: less than a high school diploma, high school graduates without college, some college or associate degree, and bachelor’s degree and higher. In December 2023, the respective unemployment rates were 6.0%, 4.2%, 3.1%, and 2.1%, respectively.
Sources: Bloomberg, Bureau of Economic Analysis, Bureau of Labor Statistics, U.S. Commerce Department, and Wells Fargo Investment Institute. Wage growth: monthly data from January 1, 2010 to November 30, 2023. Capital spending plans and real capital equipment orders: monthly data from January 1, 2019 to November 30, 2023. Compensation/corporate income: quarterly data from January 1, 1980 to September 30, 2023. Job growth: quarterly data from January 1, 1980 to December 31, 2023. Unemployment rate: monthly data from January 1, 2010 to December 31, 2023. YOY = year-over-year. Capital spending plans represented by three month moving average of a diffusion index of Dallas, Kansas City, N.Y., Philadelphia, and Richmond Fed district respondents reporting planned increase. Real capital equipment orders represented by three month moving average of non-defense equipment shipments (for example, aircraft).
Key Takeaways
- In the coming months, we believe overall business investment will suffer more from diminishing capital-spending plans and weakening growth of inflation-adjusted capital-goods orders than it will benefit from targeted support from recent government stimulus.
- Despite reduced price pressures, low unemployment tied to labor-market dislocations has restrained the decline in wage inflation. Leading-edge wage gains have rotated from low-wage leisure and hospitality to construction and manufacturing.