PIMCO's thesis: corporate profits will be replaced by labor wage hikes

[bart]

Re: PIMCO's thesis: corporate profits will be replaced by labor wage hikes

Can't have you going too long without being 'Finned' ... (insert little twisted evil thingy ;-)

Can't have you being too needy... ;)
http://www.nowandfutures.com/grins/smiley_twisted.gif

On general inflation we definitely are in sync. We've had just a bit of a slowdown, but chances are it doesn't have legs. I still think we're in a very seventiesish type environment. But as they say, history doesn't repeat so much as it rhymes. This time around I think the wage increases will be felt more abroad while in the US they will have a hard time keeping up with the cost of living. Say if we get those 8%-10% wage increases domestically it'll probably be associated with 10%-15% increases in the price of imported goods - which happens to be just about everything we buy - including energy and manufactured goods.

We might even be getting "helicopter drop lite" already. The Bernanke Fed seems more intent on trying to engineer a "soft landing" for the housing market than stemming inflation.

We continue to track well - those 8-10% wage increases will sadly be eaten up easily by the higher real inflation rate.

Benny and the FOMC Jets... *sigh*... I'm not sure what I like less, the attempted fine tuning for housing, etc. or the new and improved political bias so the economy hopefully doesn't look so bad by election time.

[Finster]

Re: PIMCO's thesis: corporate profits will be replaced by labor wage hikes

Can't have you being too needy... ;)
http://www.nowandfutures.com/grins/smiley_twisted.gif





We continue to track well - those 8-10% wage increases will sadly be eaten up easily by the higher real inflation rate.

Benny and the FOMC Jets... *sigh*... I'm not sure what I like less, the attempted fine tuning for housing, etc. or the new and improved political bias so the economy hopefully doesn't look so bad by election time.

Interesting point about the political bias. Historically, the Fed has actually used the period between the presidential and mid-term elections as its "inflation-fighting" period, and then the period between the mid-term elections and the next presidential election as its "economic growth" period. This is the main reason for the four-year cycle in stocks. In other words, politically speaking the Fed has looked at the mid-term elections as throw-aways.

But if this period is supposed to be the "inflation-fighting" phase, look out for the "economic growth" phase! The pendulum has simply not swung far enough in the tightening direction to allow a significant move in the easing direction without something breaking!

[bart]

Re: PIMCO's thesis: corporate profits will be replaced by labor wage hikes

If the RoC minus CPI-U minus "CPI-Lies" #s above are correct we'll have either wage appreciation or a revolution the next time credit gets tight.

Just using quick estimates... Williams has real hourly wages dropping by about 1% in 1998 and 1999, roughly 3% from 2000 to 2004 and ~5% for 2005 and 2006.

That's a compounded drop of 19% in only eight years. I guess something has to account for the home equity extraction numbers, but that seems almost too steep to believed.

Sometimes rate of change numbers can also mislead, just like pretty much any stat.

For perspective, the actual raw hourly earnings rate was around $13/hr in 1999 and is now $16.76.