This morning the markets are shocked thanks to a year-over-year gain in US salaries and wages of 2.6%. The ten-year Treasury yield is now up almost 10% over the last four days.
I was at a BlackRock iShares conference last week where Morgan Stanley’s economist Ellen Zentner predicted almost this exact number and reaction:
Ellen Zentner (MS) @ishares – bond market will be shocked in a few weeks when salary and wage growth for April hits 2.7% YoY
— Downtown Josh Brown (@ReformedBroker) April 22, 2015
Bonds are selling off hard on the news and stocks don’t know whether to laugh or cry.
Here’s the chart via Quartz:
Josh here – obviously this stands in sharp contrast to the malaise depicted in Q1’s abysmal GDP release. Now of course, there’s no reason to believe that this is the start of a more meaningful trend. Every economist will tell you that the hallmark of the post-crisis period is the “growth scare” where it looks momentarily like we’re breaking into escape velocity. All big bets on this sort of thing have ended in tears so far.