BLS Daily Report: Friday, April 26, 2002 A survey of business conditions conducted during the first two weeks in April found that the recovery has "deepened and widened" and profit margins showed the first improvement in seven quarters, the National Association for Business Economics said April 25th. "The Economic Recovery has deepened and widened, with all but the transportation, utilities, and communications sectors showing marked improvement," said Harvey Rosenblum, current NABE president and senior vice president of the Federal Reserve Bank of Dallas. "Profit margins showed the steepest rise in 20 years However, the survey raises the question whether productivity gains will stay ahead of incipient inflationary pressures" Daily Labor Report, page A-11).
Private industry employers saw their compensation costs increase 3.9 percent over the year ended in March, according to figures released by the Bureau of Labor Statistics. For the first quarter of 2002, the compensation costs increased 0.9 percent for private industry workers, slightly below the 1.0 percent in the fourth quarter. Most analysts expect pay gains to remain moderate in the early stages of the economy's rebound. "The deceleration in the ECI says more about last year's labor market than current employment trends," says Maury Harris, chief U.S. economist at UBS Warburg in New York (Daily Labor Report, page D-1). The Labor Department reported today that its employment cost index rose 0.8 percent in the first three months of the year. The index-- a broad measure of changes in workers' compensation-- was down from a seasonally adjusted 1 percent rise in the previous quarter. "Employers aren't sure whether this recovery is for real and whether it will last," said Clifford Waldman, an economist at Waldman Associates. A second Labor Department report today showed that fewer Americans filed new claims for jobless benefits last week. Claims fell a seasonally adjusted 31,000 to 421,000, the lowest level in a month (The New York Times, page C2). It now appears likely that strong economic numbers early this year were boosted by "borrowing" from March and April. "We are facing a payback for the exceptionally strong growth we saw in January and February," says Mark Vitner, senior economist at Wachovia Securities. He says this supports Federal Reserve Chairman Alan Greenspan's message that the recovery will be slow-moving, and it increases the chance that interest rates won't go up until at least late summer ( The Wall Street Journal, page A2). The last five years has been almost a Golden age for U.S. households. Wages, real estate, and stocks-the three main components of household prosperity- are all up sharply since 1996. Real wage and salary income per worker is up a strong 16%. The median sale price of existing single-family homes, adjusted for inflation, has increased by 18%, one of the biggest gains on record. And the value of stocks held by households, even after the meltdown, is up 41% since the end of 1996 (Business Week, April 29, page 38).
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