Societe Generale’s resident bear Albert Edwards has admitted to being caught off guard by continuously weak U.S. wage data.

“I had expected it to roar like a lion, but instead it has been as gentle as a lamb,” said Edwards in a research note on Thursday, highlighting that three consecutive employment reports have seen average hourly earnings – a key measure of wage inflation – surprise on the downside.

“I feel especially foolish as I had written that wages were set to accelerate sharply, forcing the (Federal Reserve) to tighten aggressively and thereby driving both bond yields and the dollar higher,” he added, as his mea culpa continued.

The well-known strategist attributes his wrong-footed assumption to a belief that nominal wages had stayed subdued through 2016 primarily due to weak headline consumer price inflation (CPI) in the past few years, meaning workers’ real wages had recently experienced stronger growth than seen for a while.

Yet CPI’s rebound in the past six months has seen such growth become stagnation. Edwards says that he had anticipated such a dynamic would have triggered protests from increasingly pinched workers, however, this has not yet eventuated.

Edwards allows himself a partial salvation, however, in the form of other measures of wage inflation in the U.S. – such as the Employment Cost Index (ECI) – which he says are demonstrating a continued rapid acceleration, in line with his expectations.

Combining this with underwhelming productivity growth implies that unit labor costs are heading higher by almost 3 percent annually, he adds, well ahead of the pace by which corporates can raise their output prices in this climate.

“The bottom line is that U.S. corporate margins are suffering a savage squeeze and have been for some time. What then do I make of the heady first-quarter company reporting round? Not much,” he warns.

Edwards returns to his truer bearish form by wrapping up his research with an observation that serves as a further caution to those taking comfort in the strong earnings season.

“The fight-back by labor to secure their rightful share of the economic pie is ongoing, but it seems likely that the savage downward trend in the share of labor compensation that had been in place since the 2001 recession seems to have at last been broken,” he concludes.

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