ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, May 1, 1996 TAG: 9605010046
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press|
Workers' wages are rising at the fastest pace in four years, and consumer confidence is surging. But those signs of a reviving economy also are raising concerns about possible inflation.
The Labor Department said Tuesday its Employment Cost Index rose 3 percent over the 12-month period through March, including the steepest advance in salaries since 1992.
``It tells me there are the beginnings of some pressure on wages, although it's too soon to say it marks a trend,'' said economist Richard Berner of Mellon Bank in Pittsburgh. ``There's a lot of pressure on companies to hold the line on cost growth. ... But it's certainly something to keep our eye on in coming months.''
Although the report showed the biggest rise in total compensation in two years, it was unlikely to relieve the anxiety of many workers whose stagnant wages have become a political issue in this campaign year.
Benefit increases were among the smallest on record and included the first quarterly decline since the government began monitoring in 1982. And while compensation of white-collar workers rose 3.4 percent and beat the 1995 inflation rate of 2.5 percent, wages and benefits of blue-collar workers and services industry employees rose 2.2 percent.
The index is regarded as the best measure of labor costs, which represent about two-thirds of a product's price. Its release followed recent increases in energy and food prices on commodities markets that also have heightened inflation worries.
In its report, the Labor Department said wages and salaries jumped 3.2 percent in the last year, the steepest gain since an identical increase in the 12 months ended in March 1992. Pay represents nearly three-fourths of total compensation.
Benefit costs, on the other hand, rose just 2.2 percent, the slowest since the government began keeping track in 1982. They actually fell 0.1 percent in the January-March quarter.
Until recently, slow job growth had provided workers little leverage to seek increased wages and benefits. But, Berner said, economic improvements have resulted in relatively tight labor markets in some parts of the nation.
The department reported earlier that 764,000 jobs were created in February and March, more than twice as many as the preceding two months. Many analysts predict the department will report 123,000 payroll additions when it releases the April report Friday.
Berner said the slower increase in fringes was in line with companies reducing growth in benefit costs, particularly health care.
``It's possible that workers may now be willing to accept less coverage in terms of benefits in exchange for somewhat better wage performance,'' he explained.
During the first quarter, the overall index rose a seasonally adjusted 0.7 percent, little changed from the 0.8 percent advance three months earlier.
On Wall Street, traders remained hesitant in advance of this week's key economic data, including first-quarter gross domestic product on Thursday and April employment on Friday.
By late afternoon, the Dow Jones industrial average spent much of the day in negative territory before rallying late in the afternoon. Bonds were lower.
In a separate report, a survey by the New York-based Conference Board showed that consumer confidence in the economy surged in April as worries over finding jobs dropped to a six-year low.
The proportion of survey participants who see a tough job market fell from 26.2 percent to 21.3 percent, the lowest percentage in more than six years, the business-funded research group said Tuesday.
A top Treasury Department official, meanwhile, described the economy Tuesday as growing at a moderate pace and contended ``there is little solid evidence of any change in underlying inflation fundamentals.''
``The consensus forecast continues to call for steady, sustainable growth, somewhat above 2 percent for the four quarters of this year,'' Assistant Secretary Joshua Gotbaum told the department's Borrowing Advisory Committee. ``To us, that still seems to be the most probable outcome.''
Also, the National Association of Purchasing Management reported a survey found its members predicting the U.S. economy will slow in the second half of the year and manufacturing employment will fall.
But the purchasing managers forecast that inflation pressures from U.S. factories will remain low, with only an 0.6 percent average rise in prices of raw materials for all of 1996.
LENGTH: Medium: 86 lines ILLUSTRATION: GRAPHIC: Chart by AP.by CNB