Wage inflation is starting to hurt several groups in the S&P 500, according to Fundstrat head of research Thomas Lee.
"For the past few years, no one thought about wage sensitivity because there's been slack in the labor market," Lee said Friday on CNBC's "Trading Nation." "But since May, the companies which have the most wage exposure have under-performed those with the least by 1,600 basis points. That's a massive relative performance differential."
He says restaurants, retailers, grocers and even trucking companies are most vulnerable to higher wages. That's because these areas generally have the lowest market value for their number of workers.
"A company's value is comprised of the people assets, the hard assets and the intellectual property assets. When you take the market value of a business divided by the employees, you get a sense for how much other things are pulling the weight for that company," said Lee. "A company like Darden Restaurants has $50,000 of market cap per employee. There's going to be a real effect to shareholders if a company like Darden has to increase the benefits it pays to its employees."
The Employment Cost Index, which is considered the broadest measure of labor costs, grew by 0.6 percent in the third quarter. It may not seem like a significant number, but it points to a pickup in wage inflation.
Plus, the latest figures from the Labor Department show hourly wages for private sector workers increased 2.6 percent in September versus a year earlier. Even though the figure was in line with estimates, it also supported the case that a growing wage trend is emerging.
But just because fatter paychecks are bad for certain areas, Lee predicts the impact won't be enough to drag down the entire index. In fact, he's sticking with his year-end 2016 S&P target of 2,325 — a level that's nearly 9 percent higher than Friday's close.
Lee said many companies are immune to the trend, particularly in technology.
"Facebook has a $372 million market cap and 1,000 employees. That is a $30 million market cap per employee," Lee said. "That actually means Facebook, if they had to suddenly treat their employees to free lunches and buy them a Lamborghini — it's not going to hurt shareholder value because you're dealing with $30 million in market cap per employee."
Correction: This story was revised to correct the comparison period for the 2.6 percent increase in hourly wages for private sector workers in September. It was from a year earlier.