BLS DAILY REPORT, FRIDAY, APRIL 28, 2000
RELEASED TODAY: In the United States, labor productivity in manufacturing
increased in 1998 by 4.7 percent, according to revised data from BLS. The
U.S. achieved the highest productivity growth rate among the 11 countries
being compared. The countries with the next largest increases were the
former West Germany and France. Only one country, Japan, experienced a
productivity decline. These estimates represent revisions to the data
contained in a news release issued August 27, 1999, and are based on data
available as of December 1999. ...
Soaring benefit costs fueled the sharp 1.5 percent, seasonally adjusted,
gain in private industry compensation costs in the first quarter -- the
largest increase in more than 17 years, BLS reports. The employment cost
index shows that compensation costs -- wages and salaries and benefits -- in
private industry rose 4.6 percent in the year ended in March, the largest
gain since a 4.6 percent increase in December 1990. Private-sector benefit
costs shot up 2.3 percent in the quarter, the largest increase in more than
12 years. For the year ended in March, benefit costs have jumped 5.5
percent, the greatest yearly increase since a 5.8 percent advance in the 12
months ended June 1993. ... (Daniel J. Roy in Daily Labor Report, page
D-11).
The U.S. economy barreled ahead in the first quarter of 2000 as the gross
domestic product grew at a 5.4 percent annual rate, the Department of
Commerce says. Although the increase in the Nation's output of goods and
services was less than the 6 percent rate that many economists had expected,
it still was well above the average quarterly gain of 4.4 percent over the
past 4 years. ... (Daily Labor Report, page D-1).
__Americans went on the biggest buying binge in 17 years, keeping the U.S.
economic expansion growing at a rapid pace in the first 3 months of the year
despite recent efforts by the Federal Reserve to cool down the economy
through interest rate increases. In a possible sign of inflationary
pressures, the BLS also reported a surprising jump in labor costs, mostly
because of rising health-care costs. ... Some economists note that the
increase comes after months in which wage increases have not kept up with
productivity gains. Productivity has increased on average by about 3
percent a year recently, also unusual this late in an expansion. Moreover,
many companies in recent weeks have reported rising profits. That suggests
that any increase in compensation costs has not begun to eat into profits,
which would cause companies to raise prices. ... The wage report indicates
that overall compensation costs rose mostly because of higher benefit costs.
Labor Department data show that health insurance costs rose 7.6 percent over
12 months, a huge increase. ... (Glenn Kessler in Washington Post, page
A1).
__With lavish consumer spending providing the stimulus, the American economy
turned in another very robust quarter, as new evidence emerged that
prosperity is finally pushing up labor costs, raising fears of higher
inflation. The inflation rate, as measured by the Commerce Department, rose
to 3.2 percent in the first quarter, mainly because of higher fuel prices.
But Wall Street expressed the worry that even as oil prices recede, labor
costs will accelerate and keep the inflation rate rising. ... What most
alarmed Wall Street, which is always fearful that rising inflation will
undercut the public's enthusiasm for stocks and bonds, was a report that
said labor costs rose at a much faster pace during the quarter -- partly
from growing wages, but mostly from greater company outlays for employee
benefits. The Employment Cost Index increased 1.4 percent during the
quarter, up sharply from the 1 percent increase in the fourth quarter. ...
(Louis Uchitelle in New York Times, page A1).
__In two fresh warnings that long-dormant inflationary pressures could
finally be stirring, the government reported that first-quarter labor costs
shot up at their fastest pace in a decade, while consumer prices continued
to creep up. The Labor Department's employment cost index grew 4.3 percent
in the 12 months ended in March, the sharpest increase in more than 8 years.
Much of the growth reflected rising health insurance costs and a tight labor
market. Last year, total compensation rose 3.4 percent. ... The U.S.
economy, meanwhile, grew at an annual rate of 5.4 percent in the first
quarter, somewhat slower than the torrid 7.3 percent pace recorded near the
end of 1999, but still well above the level Federal Reserve officials
believe can be maintained without triggering inflation. The increase in
gross domestic product, the broadest measure of the nation's total output of
goods and services, was sparked by an eye-popping 8.3 percent rise in
consumer spending, the sharpest gain in more than 17 years. ... The Labor
Department's April employment report next Friday would further strengthen
the rate hawks if the unemployment rate drops or wages jump sharply. On the
other hand, the first-quarter productivity report due out the day before
could show companies are still able to offset higher labor costs. On May
16, a half hour before policy makers gather, the April consumer price will
be released. Another big jump would indicate that the jolting March report
wasn't a fluke. A tame report would reduce the sense of urgency (Wall
Street Journal, two articles on page A2).
New claims filed with state agencies for unemployment insurance benefits
increased sharply by 26,000 to a seasonally adjusted 283,000 in the week
ended April 22, the Department of Labor reports. ... (Daily Labor Report,
page D-25).
The Conference Board's help-wanted advertising index declined by 3
percentage points to 87 percent in March, but the survey data continues to
show tight labor markets in all regions. The March index reading was only
slightly below the 89 percent level shown for the year-earlier period. ...
Strong demand for labor will "send the unemployment rate below 4 percent
this spring," predicts a Conference Board economist. ... (Daily Labor
Report, page A-7).
Despite a long tradition of venerating the elderly and granting status with
seniority, it suddenly is a handicap in Japan to be over 45. Age is proving
to be a brutal discriminator, as companies are tearing down the seniority
system, leaning on the upper ranks to retire, and offering higher salaries
to young employees. Japan has no law against age discrimination. ...
(Washington Post, page A1).
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