NEW YORK (Reuters) - U.S. companies are warning about rising wages eating into profit margins, increasing investor worries that next year’s expected drop in profit growth may be sharper than feared.
Amidst overall strong quarterly results, climbing labor costs are a growing concern, with more than a dozen companies in the S&P 500 .SPX mentioning them in conference calls so far this earnings season.
That is up from just a handful of companies that noted these concerns over a similar period in the year-ago quarter, an analysis of earnings calls by Thomson Reuters showed.
Next week, several retailers including Walmart (WMT.N) and Macy’s (M.N) are due to report results and investors will be keen to hear what they say about labor.
Retailers and restaurants tend to have large employee bases and are expected to be among companies most likely to feel the biggest impacts of higher wages.
Morgan Stanley strategists wrote in a note this week that hotels, restaurants, retailers, energy equipment and services, and IT services may be among industries most exposed to rising wages.
“Wage pressures have been building for some time, but we finally saw them really pop ... in the October jobs report, so I think that’s going to continue to be an issue,” said Kristina Hooper, chief global market strategist at Invesco in New York.
Worries about the potential for wage inflation have been picking up as economic data has shown that U.S. labor market conditions are tightening.
Wage pressures could increasingly be an issue as earnings-per-share growth for S&P 500 companies is expected
