WealthTrack
- Microsoft's salary freeze is the latest sign that US inflation is cooling, David Rosenberg says.
- The tech giant's move suggests a dangerous wage-price spiral isn't underway, he notes.
- The veteran economist pointed to new inflation data as evidence of slowing price growth.
Microsoft's decision to not raise salaries for its full-time employees this year, and new inflation data for April, both signal a slowing pace of price growth in the US, according to David Rosenberg.
"Adding to today's disinflation news -- Microsoft hitting the tapes stating that it won't be giving raises to full-time employees this year," the veteran economist and Rosenberg Research president said in a Wednesday tweet. "What ever happened to that 1970's wage-price spiral??"
Microsoft CEO Satya Nadella wrote in an internal email that salaried employees will not receive raises this year as tricky economic conditions are affecting customer demand, the labor market, and the company's need for technological investments.
Moreover, the Consumer Price Index (CPI) rose 4.9% on an annualized basis in April, its lowest rate of growth since May 2021.
Rising wages can fuel price increases and vice versa, as employees facing higher prices demand better pay to maintain their living standards, which leads to companies raising prices to offset their higher costs, and so on. Some economists expressed concern about a wage-price spiral earlier this year.
Rosenberg, the former chief North American economist at Merrill Lynch, said that underlying inflation data suggests prices actually fell in April.
"Strip out the rental measures and used cars, clear anomalies, and the core CPI index DEFLATED 0.1% MoM in April, Rosenberg tweeted. "We haven't seen anything like that since Jan/2021, when Jay still had a few toes in the 'transitory' camp. So, put that in your pipe and smoke it!"
Inflation slowed to 4.9% on a headline basis in April, well below its 40-year high of 9.1% in June, but above the Federal Reserve's 2% target. The US central bank has fought inflation by hiking interest rates from nearly zero to upwards of 5% since last spring, in a bid to encourage saving over spending and make borrowing more costly.