Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 27, 1994 TAG: 9404270076
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: By JOHN D. McCLAIN ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium
The Labor Department said Tuesday its Employment Cost Index rose 3.2 percent for the 12 months, down from 3.5 percent a year earlier and the tiniest increase since the government began tracking wages, salaries and benefits in 1982.
The index is considered one of the best gauges of wage inflation pressures. And since employment costs represent about two-thirds of a product's cost, it suggested price hikes will be held in check in the near future.
``But it's a two-edged sword,'' said economist Robert G. Dederick of the Northern Trust Co. in Chicago. ``While it's reassuring on the inflation side, it shows wages are just keeping up with inflation. There's no increase in purchasing power.''
President Clinton ``continues to be somewhat concerned about the slow growth of wages,'' White House Press Secretary Dee Dee Myers said. ``Wages have been stagnant for more than a decade now.''
But she said the economy is healthy and jobs are being created in record numbers.
She also said Clinton has no immediate plans to push for a minimum wage increase, although it is ``something he's expressed support for.''
``It's a wonder people feel so good,'' Dederick said, alluding to a survey released Tuesday showing that consumer confidence jumped in April to its highest level in nearly four years.
``I suppose they're more confident about their job situation. They're not getting paid much, but they have a job,'' he added.
The Conference Board, a New York-based research group, said its index of consumer confidence rose five points in April to 91.7. The index is now at the highest level since a 101.7 reading in July 1990. In the board's South Atlantic region, which includes Virginia, the index stood at 105.9 points in April, up from 102.7 in March and 76.8 points in April 1993.
``Basically, it finds consumers are believers in the expansion,'' Dederick said.
Analysts believe the increased confidence will translate into continued consumer spending, which represents about two-thirds of the nation's economic activity.
The Employment Cost Index showed wages and salaries - 72 percent of total compensation - rose 2.9 percent in the year ended in March, slightly more than the 2.7 percent advance a year earlier.
But they were barely keeping up with inflation. According to the department's Consumer Price Index, inflation rose 2.7 percent last year and, so far in 1994, is advancing at a 2.5 percent annual rate.
Benefit costs rose 4.1 percent, down from 5.4 percent a year ago and the smallest 12-month increase since a 3.7 percent gain in the year ended Dec. 31, 1987.
The department said the moderation in benefit costs reflected in part a continuing slowdown in health insurance costs.
The small overall increase in employment costs ``has to be the sort of thing the Federal Reserve should be impressed by,'' Dederick said. ``Inflation remains a problem for tomorrow.''
During the first quarter of 1994, employment costs rose a seasonally adjusted 0.7 percent, down from 0.8 percent during the October-December period.
Wages and salaries also were up 0.7 percent, compared to 0.7 percent in the final three months of 1993. Benefit costs rose 0.9 percent, slower than the 1 percent increase in the fourth quarter.
Analysts prefer to track the latest 12-month performance because it smooths out the volatility of the quarterly reports and provides a more accurate picture of inflationary trends. The annual figures are not adjusted for seasonal variations.
In another report Tuesday, the Labor Department said workers covered by union contracts negotiated in the January-March quarter won wage increases averaging 2.5 percent annually over the term of the agreements.
The agreements they replaced, most of which were negotiated in 1991, had provided raises averaging 3.6 percent. Average wage increases in union contracts have declined in all but one of the past seven years.
by CNB