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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (28521)	4/26/2005 12:37:41 PM
From: shades	Read Replies (1) \| Respond to of 116555

With lower wages who will keep buying all these US equities? We spent to create jobs - we did - in china - are they going to buy US equities? I thought in aggregate they were struggling just to buy an old washing machine. Federal Reserve officials, faced with oil prices that have risen 50 percent on the New York Mercantile Exchange in the past 12 months, have taken comfort in benign wage gains. Rocky Mountain News rockymountainnews.com Fed comforted by sluggish wages More firms to hand out raises, but board says inflation at bay By Will Edwards, Bloomberg News April 26, 2005 The highest percentage of U.S. companies in almost five years said they raised wages in the first quarter, a sign labor costs may be starting to accelerate, according to a survey of corporate economists. Thirty-six of the 103 economists polled - or 35 percent - by the National Association for Business Economics reported higher wages and salaries in the year's first three months, up from 28 percent in the fourth quarter. The reading was the highest since the second quarter of 2000. The rest reported no change. Federal Reserve officials, faced with oil prices that have risen 50 percent on the New York Mercantile Exchange in the past 12 months, have taken comfort in benign wage gains. Fed officials want to guard against a sustained gain because wages account for two-thirds of the cost of goods and services. The Fed may continue raising interest rates if wages continue to rise. 'At the very least, there's a yellow light signal with regard to inflationary pressures on the economy,' said James Meil, chief economist at Eaton Corp., the world's second-largest maker of hydraulic equipment, in an interview. Meil helped conduct analysis of the association's survey. 'If you take a look at what they say in prices, wages and costs, things seem to be picking up, heating up on the inflationary front.' The percentage of companies raising prices in the quarter rose to 34 percent from 33 percent, the association said. More companies also added workers in the quarter. The percentage of companies with rising employment levels rose to 29 percent from 27 percent, according to the survey. The U.S. economy added an average of 159,000 jobs in the first three months of the year. Workers' average hourly earnings rose 0.3 percent in March after a 0.1 percent rise in February. The Federal Reserve's Open Market Committee, which sets the Fed's benchmark interest rate, saw higher inflation risks at its March 22 meeting. The committee debated whether to jettison language favoring a 'measured' pace of rate increases, records released on April 12 showed. While concluding that price risks were 'now tilted a little to the upside,' Fed officials also saw signs of slack in the U.S. economy, notably in labor markets. 'Pressures on prices stemming from labor costs seemed well contained and were expected to remain damped in coming quarters,' the minutes said. 'If wage increases were to start picking up on a sustained basis, they would be very concerned about inflation because that immediately hits services prices,' which cover about 60 percent of the consumer price index, Roger Kubarych, a senior economic adviser at HVB America Inc. and a former economist at the Federal Reserve, said in an interview.