BLS DAILY REPORT, THURSDAY, AUGUST 14, 1997
RELEASED TODAY:
CPI -- On a seasonally adjusted basis, the CPI-U rose 0.2 percent
in July, following increases of 0.1 percent in each of the preceding
four months. The food index increased 0.3 percent in July ....The
energy index continued to exert a moderating effect on the CPI-U,
declining 0.1 percent in July ....Excluding food and energy, the CPI-U
rose 0.2 percent, following an increase of 0.1 percent in June. The
larger advance in July reflects upturns in the indexes for
transportation (other than for motor fuel) and for apparel and upkeep
....
REAL EARNINGS -- Real average weekly earnings decreased by 1.0
percent from June to July after seasonal adjustment, according to
preliminary data released today. This decline was due to a drop of 0.9
percent in average weekly hours along with a 0.2 percent increase in the
CPI-W. Average hourly earnings were unchanged in July ....Over the
year, real average weekly earnings grew by 1.7 percent ....
__Continuing an unprecedented series of seven consecutive declines, the
Producer Price Index for Finished Goods dipped a seasonally adjusted 0.1
percent in July. July marked the longest series of declining PPI
finished goods since the government began tracking these costs in 1947
and beats a five-month string that lasted from August through December
1952 ...."We don't see any identifiable inflation pressures," said BLS
economist Bill Thomas. Thomas cautioned against assuming the excellent
news on the producer level means the economy is in a period of
deflation. The PPI includes only a portion of the economy, and the PPI
for finished goods does not measure prices in the services sector -- the
largest part of the U.S. economy ....(Daily Labor Report, page D-1).
__The Washington Post (page A1) reports that wholesale inflation has
disappeared from the economy's landscape for an unprecedented seventh
month. That's good news for consumers, who will likely benefit
eventually from stable or lower retail prices as items work their way
into stores ....The persistent drop in producer prices has led some
economists to believe that people should forget their inflation fears
and start worrying about actual deflation. The nation has not
experienced full-scale deflation -- price level drops, asset value
declines, and a contraction in gross domestic product -- since the
Eisenhower administration. Historically, deflation also generally
includes rising unemployment, says an economist at Lehman Brothers, Inc.
But that same economist believes that the nation is nowhere near a
deflationary cycle. Although producer prices are falling, it's more
important to note that the CPI continues to rise at a 2.3 percent annual
rate. There is a divergence of the two indexes because producer prices
are made up almost entirely of hard goods, while two-thirds of the CPI
measures the cost of services, such as entertainment ....
__Revived after a spring rest, shoppers briskly increased spending at
retail counters for the second straight month in July, while an
important gauge of inflation was even more subdued than expected,
government reports showed today ....(New York Times, page D1).
__Inflation remained in check last month despite signs of resurgent
consumer spending, indicating that Federal Reserve policymakers will
likely leave interest rates alone yet again when they meet next week
....(Wall Street Journal, page A2).
Wage data compiled by BNA for all industries in the first 32 weeks of
1997 shows that the median first-year wage increase in newly negotiated
contracts is 3 percent an hour to date in 1997, the same as the
comparable period of 1996 ....(Daily Labor Report, page D-15).
The Washington Post (page E1) says that the layoffs, though still few in
number, are starting to mount at small businesses throughout the country
as the strike against UPS enters its 11th day ....
Banking jobs may bounce back, according to Business Week (Aug. 25, page
6). Commercial banks are hiring again for the first time in years.
That's largely thanks to a looser regulatory climate in which banks can
do everything from selling mutual funds to underwriting debt. Annual
average employment at commercial banks, 1987 to the present, is shown in
a graph whose data is attributed to BLS ....
To July's strong employment report, and other signs that the economy is
reaccelerating, add the sentiments of the nation's bellwether
small-business sector. According to the National Federation of
Independent Business, small business optimism in July hit its highest
level since late 1994 ....Not only was job creation in both June and
July the strongest in years, but hiring plans were reported by 18
percent of respondents in July, the highest level since the NFIB survey
began in 1973. And though the number reporting wage increases was high,
it was down from its recent December peak, and plans to raise prices
were subdued ....(Business Week, Aug. 25, page 32).
Mike McNamee writing in Business Week (Aug. 25, page 42) points out that
the productivity boom is still a mystery ....Statisticians bumped up the
GDP's 1993-96 growth rate only slightly -- from 2.6 percent a year to
2.7 percent. They revised down the income measure a bit, but still left
a major gap ....The New Economy may be fueling an output surge, but the
data don't prove it ....And it's still possible that the stats are
flawed ....
The current drive to move people from welfare to work is getting a big
boost from fast-growing small companies, a survey by Coopers & Lybrand
shows. But much of the hiring appears to result more from labor
shortages than from any company goals to hire welfare recipients
....(Wall Street Journal, page B2).
