DATE: Friday, August 8, 1997                TAG: 9708080571

SECTION: BUSINESS                PAGE: D3   EDITION: FINAL 

SOURCE: BY JONATHAN LANSNER, THE ORANGE COUNTY REGISTER 

                                            LENGTH:   46 lines

INFLATION-WARY U.S. WATCHES WAGE INDEX

Just-about-nobody got a decent raise in the second quarter. So says the Employment Cost Index from Uncle Sam's Bureau of Labor Statistics. It showed further continuation in the hallmark thesis of this economic expansion: extremely modest increases in compensation for the nation's work force.

So you say you already knew that? Well, on one hand, of course. But - and I mean but - if I told you that this is the number Federal Reserve Chairman Alan Greenspan has been watching the past year, would you take better notice?

In this part of the business cycle, can growth continue without inflationary woes? How long can companies grow and not heavily reward their workers - or find it so hard to hire that wages rise, thanks to job switching? So it's a natural that the Employment Cost Index - with Greenspan acting as its chief cheerleader - becomes The Number.

In a world where economic barometers are plentiful, there's always an indicator or two in the spotlight. But few gain a starring role like The Number. Its release has become almost a religious rite for those who believe that wages will soon soar, killing the economic nirvana we're enjoying.

So just what are we watching? It's the product of a quarterly survey by BLS economists of some 5,000 employers from both private and government sectors that involves wages for 17,000 occupations. The goal is to figure out just who is paying what to their people - in terms of salaries, bonuses, perks and benefits, says BLS economist Gayle Griffin.

One should note a certain oddness to watching The Number these days, considering its genesis was the inflation paranoia of the early 1970s. Then, when the inflation rate doubled all the way up to 6 percent, we became possessed by the inflation demon. Price controls were instituted. Blue-ribbon panels were commissioned. And The Number was born.

All that price watching went for naught, however, as inflation ran to double digits. It took Greenspan's Fed predecessor, Paul Volcker, to break the inflationary cycle by constricting money supply, creating sky-high interest rates and a painful-but-curing recession in the early 1980s.

Today, inflation worries are far more subtle. The Number tells us that your pay and benefits have grown about 3 percent annually for five years.

Unfortunately, the worker bee is in a tough spot. If compensation was to soar - or hint at rising, thanks to The Number - bet that Greenspan will act. Interest rates will soar, and stock prices will plunge. Maybe a recession ensues. Seems like a harsh trade-off for a shot at a 5 percent raise. KEYWORDS: INFLATION WAGES ECONOMY

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