Wage Growth Set To Weight On Profit Margins

Wage Growth Set To Weight On Profit Margins 

A tightening labour market and peak margins pose a risk to S&P 500 profits in the near term; that’s according to a new research report on rising labour costs and US equities from Goldman Sachs.

The report notes that while average hourly earnings growth has spiked higher to 2.3% this year, this growth is still below the long-term average. Moreover, the healthy labour market should drive an acceleration of the trend labour costs.

Economic Growth: Wages And The Productivity Paradox

This could be a problem for corporates. Goldman’s analysis suggests that each, 100 bps acceleration in US labour costs above a baseline assumption of 3% would weigh on S&P 500 EPS by...