This is from the WSJ:
Analysts Search
But in recent years, for reasons analysts still struggle to explain, many workers haven't demanded huge pay raises, allowing companies to avoid having to institute price increases.
That dynamic may finally be changing, raising the real possibility that a scarcity of workers in the midst of a booming economy may finally trigger widespread inflation.
"There's a good chance that the pool of available workers has dropped past the lower limits of where it can go without sparking inflation," said Mark Vitner, an economist with First Union Corp. in Charlotte, N.C.
Economic Data Raise Likelihood Fed Will Lift Rates Half a Point
The report showed that the increases in overall compensation costs were most pronounced in the regions with the tightest labor markets. Wage and benefit costs climbed 4.6% in the Midwest, for example, a region that has a jobless rate of 3.3%, substantially lower than the national average of 4.1%, according to economic researchers RFA-Dismal Sciences. Similarly, compensation costs climbed more substantially in metropolitan areas -- which have seen extraordinarily low unemployment rates -- than in rural ones, the report found.
The increase in benefits also suggested the waning of another important trend that has kept inflation in check over the past decade: muted health-care costs for employers. Health-care costs increased 7.6% in the quarter, the largest advance since early 1993, and have been on a sharp climb for the past few months. For years, the switch to managed-care programs helped to constrain overall benefit costs. But "the managed-care savings look like they've been entirely wrung out," said Marilyn Schaja of Donaldson Lufkin & Jenrette in New York.
"I don't think we'll see benefit costs continue to increase by 2% per quarter," added Chris Varvares of Macroeconomic Advisors in St. Louis. "But there's a clear and dangerous upward trend in compensation now that we weren't seeing in the recent past."
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I think we see a 1/2% increase by Greenspan on the 16th
of May.
Hope this possibility is built into the market.-- |
