BLS DAILY REPORT, WEDNESDAY, MAY 21, 1997 RELEASED TODAY: The U.S. Import Price Index decreased 0.9 percent in April. The monthly decline was the fourth in a row with both petroleum and nonpetroleum import prices contributing to the April drop. The U.S. Export Price Index declined 0.6 percent in April, led by falling agricultural export prices .... The Wall Street Journal has a front-page article that says the gains in productivity and profits curb inflation despite pay increases ....The Fed left interest rates alone because firms are more robust and the overall economic climate is benign ....A look at businesses that are raising wages suggests, so far, that there isn't much to fear. Many employers, ranging from computer makers to fast-food companies, are boosting efficiency fast enough to afford the higher pay. Others are using hefty profits to pay wage increases. Few seem compelled, or able, to match them with price increases ....Economy wide, wage increases have been modest. In the past year, the government's best gauge of wage and benefit costs, the employment cost index, is up just 0.2 percent after inflation. That compares with a 0.1 percent decline in the prior 12 months and no change in the 12 months before that. (Inflation-adjusted wages alone are up at a 0.6 percent rate so far this year, compared with 0,3 percent last year). Adjusted by the prices of goods and services they produce -- as opposed to those they consume -- workers' compensation rose 0.8 percent in the past year, the government says. Over time, economists say, workers' wages can't rise faster than their productivity, their output per hour worked, without triggering inflation. According to the best estimates, productivity is rising about 1 percent a year. That suggests that, however pay is measured, employers can afford to raise wages faster than they have been. And though statistics on productivity don't show an upward trend, anecdotal evidence suggests that its growth is beginning to accelerate, increasing employers' ability to boost wages without boosting prices. Moreover, some economists say pay growth could safely exceed productivity growth temporarily to offset past short-falls .... __The Washington Post (page C13) says stock prices jumped back to near-record territory as investors applauded the Fed's decision not to raise short-term interest .... __The New York Times (page A1) says the Fed voted to leave interest rates unchanged, betting that the economy was slowing sufficiently to avert a resurgence of inflation .... __The Wall Street Journal (page A2) reports that the Fed, apparently convinced that the economy is likely to slow enough on its own to avoid an acceleration of inflation, decided to leave its key short-term interest rate unchanged .... It's a riddle wrapped in a mystery. With U.S. unemployment at a 24-year low, you might think wages would be taking off. Yet labor costs have remained unusually subdued -- leading experts to speculate that some new development is inhibiting wage demands. While the explanation du jour seems to be widespread job insecurity, one trend clearly deserves more attention: an unexpected leap in the labor force. After posting gains of just 1.3 million a year from 1993 to 1995, the labor force -- people working or seeking work -- has grown by 3.7 million in the past 16 months. That's more than twice as fast as the working-age population ....Labor force participation has been rising among nearly all demographic groups ....It appears that better job prospects and widespread wage gains are luring many discouraged workers back into the job market ....(Business Week, May 26, pg. 30). Christopher Cornwell, University of Georgia, and Peter Rupert, Federal Reserve Bank of Cleveland, followed a sample of men from their late teens through their mid-30s. In line with other studies, they found that married men earned 6 to 7 percent more than their unmarried peers of similar age, education, experience, and background. When the researchers looked at wage trends over time, however, they found that married and single men's paths were similar. That is, married men's wages rose no faster than their single peers. And, when they looked at married men's earnings in the years before they tied the knot, they found that their wages were already higher than those of the men who stayed single. In short, the study suggests that men who tend to get married already possess qualities that are rewarded by employers (responsibility, discipline, and loyalty) before they "tie the knot." To the extent that their wages rise a bit, the gain seems to reflect a one-time increase in the time devoted to work ....(Business Week, May 26, pg. 30). Among several factors likely to restrain inflation in the months ahead, says a Citibank economist, is the low price of oil. Since early January, he notes, the tab for a barrel has plunged from $26 to $20 ....If oil prices stay close to current levels, says a Chase Securities economist, two-thirds of last year's 9 percent surge in consumer energy prices would be reversed -- chopping half a percentage point off the CPI (Business Week May 26, pg. 30).
