BLS DAILY REPORT, FRIDAY, FEBRUARY 14, 1997 RELEASED TODAY: The Producer Price Index for Finished Goods declined 0.3 percent in January, seasonally adjusted. This followed increases of 0.6 percent in December and 0.2 percent in November ....The index for energy goods turned down after rising in each of the previous six months. Prices for finished consumer foods declined 1.0 percent in January after falling 0.1 percent in the previous month. Prices for finished goods other than food and energy remained unchanged after increasing 0.1 percent in December .... New claims filed with state agencies for unemployment insurance benefits fell 15,000 to a seasonally adjusted total of 309,000 during the week ended Feb. 8, according to data released by DOL ....(Daily Labor Report, page D-1). Janet L. Yellen was unanimously confirmed by the Senate as chairwoman of the Council of Economic Advisors. Yellen has been a member of the Federal Reserve Board since 1994. The former University of California at Berkeley economics professor replaces Joseph Stiglitz (Washington Post, page G2; Washington Times, page B7). Proof of rising U.S. productivity -- Want more evidence that U.S. productivity gains are badly understated? Than look at the growth of real sales per employee for companies in the Standard & Poor's 500-stock index, advises economist Edward Yardeni of Deutsche Morgan Grenfell Inc. Adjusted for the GDP price deflator, sales per employee closely paralleled productivity growth in the nonfinancial business sector from 1977 to 1987, reports Yardeni. But from 1987 to 1995, they surged at an average annual pace of 4.7 percent, compared with an anemic 1.1 annual rise in nonfinancial corporate productivity. The dramatic increase in sales per employee, says Yardeni, helps explain why the pickup in real wages hasn't boosted inflation. "Employers are simply getting more pay for being more productive" (Business Week, Feb. 17, page 25). A Business Week article (Feb. 17, page 32) says that many workers are asking for -- and getting -- more money. Does that mean inflation? ....People who have sought-after skills and work in fast-growing sectors, such as high tech, entertainment, and consulting, are getting solid increases. But even in some slower-growth fields such as trucking, where raises have long lagged behind inflation, bosses are feeling pressure to ante up ....The bigger raises are putting more money into people's pockets without triggering inflation. One reason is that increases in pay remain scarce in key sectors, including government, education, and health care. Also, competition is so though that employers can't simply raise prices to compensate for the higher wages. Most important of all, workers, on average, are earning their wage hikes by being more productive ....If there's any heightened insecurity these days, it may be among employers. Businesses are facing wage pressure on two fronts. After slashing in-house employment and "outsourcing" work, companies are finding that the price of outside help is escalating ....Plus, now that the job market is so strong, employers are finding that workers don't hesitate to jump ship for more money .... An accompanying commentary (page 34) by Michael J. Mandel of Business Week says that economic optimists, who see fast growth continuing without igniting inflation are right again ....Pessimists don't take into account the nature of economic growth today. They still view the economy as if it were mainly composed of autos and steel. In such traditional industries, companies react to strong demand by raising prices, eventually creating an inflationary spiral. These days, though, economic growth in the U.S. is being driven by high tech, where prices are falling rather than rising. Computers, telecommunications, and other information-related industries accounted for a stunning 40 percent of economic growth over the past two years, according to new calculations by Business Week ....By contrast, the rest of the economy -- call it the noninformation economy -- grew well below anyone's estimate of potential growth ....The most intense wage pressures in today's economy are concentrated in high tech ....Because the dynamics of high tech aren't the same as those of traditional industries, however, these costs don't get translated into higher prices ....At the same time, the expansion of the noninformation economy is slow enough to hold down a broad array of prices ....
