Prime economist David Rosenberg factors to Microsoft’s wage freeze as recent proof that US inflation is slowing

• Microsoft’s wage freeze is the newest signal that US inflation is cooling, David Rosenberg says.
• The tech big’s transfer suggests a harmful wage-price spiral is not underway, he notes.

Microsoft’s resolution to not increase salaries for its full-time staff this yr, and new inflation knowledge for April, each sign a slowing tempo of worth progress within the US, in response to David Rosenberg.

“Including to at this time’s disinflation information — Microsoft hitting the tapes stating that it will not be giving raises to full-time staff this yr,” the veteran economist and Rosenberg Analysis president mentioned in a Wednesday tweet. “What ever occurred to that 1970’s wage-price spiral??”

Microsoft CEO Satya Nadella wrote in an inside e mail that salaried staff won’t obtain raises this yr as difficult financial circumstances are affecting buyer demand, the labor market, and the corporate’s want for technological investments.

Furthermore, the Client Value Index (CPI) rose 4.9% on an annualized foundation in April, its lowest charge of progress since Might 2021.

Rising wages can gas worth will increase and vice versa, as staff dealing with increased costs demand higher pay to take care of their dwelling requirements, which results in firms elevating costs to offset their increased prices, and so forth. Some economists expressed concern a couple of wage-price spiral earlier this yr.

Rosenberg, the previous chief North American economist at Merrill Lynch, mentioned that underlying inflation knowledge suggests costs truly fell in April.

“Strip out the rental measures and used vehicles, clear anomalies, and the core CPI index DEFLATED 0.1% MoM in April, Rosenberg tweeted. “We have not seen something like that since Jan/2021, when Jay nonetheless had a number of toes within the ‘transitory’ camp. So, put that in your pipe and smoke it!”

Inflation slowed to 4.9% on a headline foundation in April, effectively beneath its 40-year excessive of 9.1% in June, however above the Federal Reserve’s 2% goal. The US central financial institution has fought inflation by climbing rates of interest from practically zero to upwards of 5% since final spring, in a bid to encourage saving over spending and make borrowing extra pricey.