Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (77574)	3/10/2000 3:46:00 PM
From: Tunica Albuginea	Respond to of 132070

Phillips Curve lives dismal.com page 7 of 7 The Phillips Curve lives The Dismal Scientist It is also evident, albeit with some work, that the Phillips Curve is useful to describe national labor market conditions. Consider compensation per hour, which despite some methodological limitations is the most accurate measure of compensation since it attempts to count stock options and signing and retention bonuses. These are becoming increasingly more prevalent forms of compensation not measured in average hourly earnings or the employment cost index. Since the nation's jobless rate fell consistently below 5.5% nearly five years ago, labor compensation growth has accelerated from 2.0% to nearly 5.0% currently. dismal.com The growth in compensation per hour has indeed decelerated over the past year, but this can likely be explained by a shift in inflation expectations. This resulted from the plunge in actual inflation that occurred during the global economic and financial crisis. As commodity and import prices collapsed, U.S. consumer price inflation fell as low as 1% and there was serious discussion regarding the possibility of outright deflation. Realizing that inflation was low and dormant, workers became much less aggressive in their wage demands. With the global economy on the mend, commodity prices up, and import prices stabilizing, CPI inflation has accelerated to over 2%. Workers will likely soon respond by asking employers for larger pay increases. Also consider that labor costs are rising in new ways that are not being counted by any labor compensation measure. Nonpecuniary forms of compensation, such as more flexible work hours or work at home, are becoming more prevalent. Employers are also devoting increasing resources to training and educating their workforce. Facing a progressively tighter labor market, employers have been increasingly hiring workers with lesser skills than those who they already employ. Conclusion The economy cannot maintain its current pace of growth for much longer without the labor market continuing to tighten, resulting in substantially more monetary tightening and significantly higher long-term interest rates. If productivity growth is to accelerate even more and forestall this eventuality, it needs to do so now, because labor compensation growth is set to accelerate. It is clear that when unemployment is low and falling, labor compensation growth accelerates. This is abundantly evident at both the national and state levels. The Phillips Curve is alive and well, and debates as to what unemployment rate would trigger accelerating inflation are increasingly irrelevant. At the current 4% unemployment rate, that time is at hand. prvious page dismal.com ------------- Message #77574 from Les Horowitz at Mar 10 2000 3:19PM Phillips Curve ntrs.com