Inflation vs. deflation.
Did you see the Manpower Inc. survey that showed hiring intentions are the strongest since 1977? This is a survey of 15,000 companies and is a fairly good indicator of future labor markets. Reporting on this, yesterday's "Wall Street Journal" commented: "The robust hiring trend,..suggests employers have also shrugged off signs that the nation's economy is slowing to a more moderate pace".
Also relevant to the CRB/deflation discussion we have been having is the following from today's WSJ.
Kevin Kliesen, an economist at the Federal, Reserve Bank of St. Louis, said that although commodities, have slipped drastically, lab, machinery and service costs haven't fallen, "Theoretically, this could lead to deflation, but if you look at the contribution of commodities to the overall price of goods it's fairly small," he said. "You might get some decrease in [consumer] prices, but unless labor costs fall, actual goods and services prices won't fall very much."
He also said that "deflation is the easiest thing to avoid. All the Fed has to do is print more money."
Still, others familiar with the CRB and its implications foretell a wider spread deflation. "We're continuing, to import deflation out of the Pacific Rim, and there's not any recovery occurring in those areas yet," said Robert Hafer, managing director at Bridge/CRB. "That's probably the critical message."
Mr. Hafer said the 'segments of the economy that usually sense the deflationary squeeze first - farmers, livestock ranchers and oil producers - already are feeling it. "Their incomes have been severely hampered," he said. "And they're going to have to, stop spending money." The next sign of deflation to watch for, he said, will be a sustained drop in consumer -spending figures.
Looks like we're not the only ones having this debate. Thanks to all who have joined in.
-Robert
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