Global Macro: Real Wage Growth Expected to Return by 2026

New economic projections indicate that the squeeze on household finances may be nearing an end, with salary growth expected to hold steady through 2025 before registering consecutive years of real gains in 2026.

Implication for Central Banks

For the Federal Reserve and the ECB, the return of real income growth is a double-edged sword. On one hand, it signals a “Soft Landing” where the labor market bends but does not break. On the other, sustained purchasing power could keep services inflation sticky, potentially forcing central banks to maintain restrictive rates for longer than the market currently prices.

Market Watch

Traders should monitor incoming Average Hourly Earnings and labor cost indices. If wage growth outpaces productivity without causing a wage-price spiral, currencies in these resilient economies could see demand support from improved consumer sentiment.

• Target Year for Real Gains: 2026
• Stability Horizon: Through 2025
• Key Institutions: Fed & ECB