The Thing in the Jobs Report that Gives the Fed the Willies

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The Fed reacts much more quickly to wage inflation than consumer price inflation. But it never reacts to asset price inflation.

In the jobs report today, there’s one figure that the Fed has riveted its collective eyes on. Sure 156,000 jobs were created, below average for 2016, and way below average for the prior two years. And the unemployment rate ticked up to 4.7%. And there were other ups and downs in the data which covered the volatile holiday period, and therefore was subject to notoriously big seasonal adjustments, and that’s all cute as far as the Fed is concerned, and they’re going to glance at it, but there’s one number they fret about: wage increases.

And not in the sense that Fed Chair Yellen occasionally inserts into her comments, but in the opposite sense.

Average hourly earnings jumped 0.4% to $26 per hour. They’re now 2.9% higher than a year ago and 5.7% higher than two years ago. However, don’t credit the minimum wage increases that became effective six days ago in cities and states around the country; they’re not yet included. Note how the trend in rising average hourly wages started two years ago:

Workers love wage increases – especially when they exceed consumer price inflation. And that props up consumer spending. But it doesn’t matter for the Fed.

One of the Fed’s jobs, in addition to inflating asset prices and keeping the biggest banks from imploding, is to make sure US employers have access to cheap labor so that they can maximize their profits and at the same time remain competitive with cheap-labor countries.




The way to do that is to make sure that over the long run, consumer price inflation exceeds wage inflation, and that therefore “real wages” (adjusted for inflation) trend lower.

Over the past decades, the Fed has been successful at it. But there have been some hiccups, and when they occur, the Fed raises rates, and sometimes sharply, to bring the system back in line. And now there’s a hiccup, and it’s getting bigger.

Consumer price inflation is based on prices that companies can charge their customers, and that customers are willing and able to pay. If they’re not able to pay those prices from their wages, they can always go into debt to pay those prices. These higher prices mean higher sales and higher profits without having to sell one extra iota. Looks great on earnings reports.

These higher prices also help debtors that borrow at fixed rates to service their debts. This includes bond issuers such as large corporations, and by extension governments that get their cut from profits and sales. Consumer price inflation has big beneficiaries.

But wage inflation raises the costs for companies, and thus puts pressure on profits, and in theory might cause share prices to take a hit, which makes the Fed, which rules with one eye on the stock market, antsy. But when wage inflation exceeds consumer price inflation, the Fed gets more than antsy. And that’s happening now.

Average hourly wages in the current report rose 2.9% from a year ago. The Consumer Price Index in November (last data point available) rose only 1.7%. Over the past two years, hourly wages rose 5.7%, but CPI “only” 2.5%.

Since late 2014, year-over-year average hourly wage increases have been significantly higher than year-over-year consumer price inflation. December 2015, the Fed raised rates for the first time in this cycle. Last December, it raised rates for a second time. And it penciled three rate increases into the 2017 calendar, which the Fed calls “gradual” – small increases spaced well apart.

But the minutes for that Fed meeting in December, released yesterday, suddenly raise a different scenario, documenting just how antsy meeting participants are getting:

They pointed to a number of risks that, if realized, might call for a different path of policy than they currently expected.

That “currently expected” path is one of “gradual” rate increases, so three hikes next year. But that “number of risks,” particularly of wage inflation taking off, would accelerate those rate increases. Because wage inflation that exceeds consumer price inflation is anathema to the Fed.

The faster wages increase, the faster the Fed is going to raise rates. Even the idea of reversing QE and shrinking the Fed’s balance sheet is now cropping up among Fed doves. If you want to know when the Fed gets serious about tightening, watch wage inflation.

But it never tries to tamp down on asset price inflation, not even at the mega-bubble stage. Rather, it encourages asset price inflation, no matter what.

The bitter irony for our hapless consumers and workers? Consumer price inflation does not help consumers and workers service their debts. On the contrary, it makes it harder: more of their wages go to covering the higher prices, and less is left over to service their debts. What consumers need to help with their debts is wage inflation.

But even if workers get some wage inflation, it will only help with their fixed-rate debts, such as fixed-rate mortgages. Variable-rate debts, such as credit cards or adjustable-rate mortgages jack up their rates as inflation and interest rates rise. And thus, our hapless consumer debt slaves are going to remain hapless – unless they get that wage inflation that the Fed hates so much.

Rising interest rates impact bonds, in a bad way. Other factors are lined up too. So how bad will it get? Worse than the 1994 “Bond Massacre,” with “sustained double-digit losses on bonds, subpar growth in developed markets, and balance sheet risks for banking systems.” Read… How Bad Will the “Bond Massacre” Get?




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  82 comments for “The Thing in the Jobs Report that Gives the Fed the Willies

  1. robert sills
    Jan 6, 2017 at 12:30 pm

    great insight, Wolf.
    sadly, we continue to be reminded of how individuals are slaves to the capitalist system

    • Paulo
      Jan 6, 2017 at 1:04 pm

      Add to this article that the Govt. CPI stats are a total fabrication, and that even with the ‘great’ (sarc/on) wage increases of 2.4% working people are likely falling behind an additional 3%, it is quite obvious that when interest rates rise or people can no longer afford to take on any more debt, (or be allowed to take on any more debt), the spinning plates will hit the ground and shatter.

      This circus is almost over.

      • Nik
        Jan 6, 2017 at 9:08 pm

        Paulo…the Circus is Far from being Over,they will just bring in More Clowns…lolol

    • Jan 6, 2017 at 2:11 pm

      Or a person could “choose” to get out of debt — or, at least reduce their debt — if not be debt free ( ex of the mortgage ) and renounce their slaver.

      IT IS POSSIBLE.

      Live within your means. Take any actions necessary to (i) increase your income ALONG WITH (ii) decreasing your outgo.

      No whining necessary — most of life is simply about making good choices.

      SnowieGeorgie

      • will
        Jan 7, 2017 at 11:44 pm

        I could not agree with you more. I have done it and have been debt free for over thirty years. I find it difficult to accurately portray the enormous “lightness of being” I have and wake up every day now still recalling the debt bondage enslavement that I no longer suffer daily from. It will make you physically sick and will kill love. That is what capitalism has devolved into. Capitalism kills love. Those that hate now control the world.

      • Francis
        Jan 11, 2017 at 2:30 pm

        It is possible for individuals, but impossible for the SYSTEM. The whole debt driven “economy” would collapse if most people got out of debt.

    • number1gi
      Jan 6, 2017 at 5:06 pm

      Exactly Comrade!
      “In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly—only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs.”

      Karl Marx

      • chris Hauser
        Jan 6, 2017 at 5:34 pm

        one of the stupidest and most pernicious passages ever. absolute nonsense.

        he had some interesting ideas, though. not that one…..

        i’m a tad puzzled by today’s op-ed, seems to be saying the fed are agents of a higher nefarious power. feeling a little “smash the system” today?

        • number1gi
          Jan 6, 2017 at 6:20 pm

          Especially the infamous “From each according to his ability, to each according to his needs.”

          I always give 110% effort for the collective. Just like Che Guevara did:

          “I ended the problem with a .32 caliber pistol, in the right side of his brain. . . . His belongings were now mine.”

        • Frederick
          Jan 8, 2017 at 8:08 am

          That’s because the FED IS exactly that and everyone knows it Chris except you evidently

    • Tom Kauser
      Jan 7, 2017 at 12:29 pm

      Less dividends? Sell Mortimer sell!

    • Blank Reg
      Jan 7, 2017 at 4:17 pm

      What other system would you rather be a “slave” to?

  2. Greatful again
    Jan 6, 2017 at 12:34 pm

    Most of the stats being referenced are of very questionable accuracy. As pointed out on this blog. Do you think the fed doesn’t know this?

  3. mynamett
    Jan 6, 2017 at 12:46 pm

    I still think that a lot of money is being printed by central banks around the world. This new money is not used to build new manufacturing plants. The only new manufacturing plant that was build with government money was tesla car factory. This new printed money goes directly into non productive asset such as housing and stock market. Dow is about to blow past 20 000 and oil price seems ready to go way back up.

    The FED is afraid of hyperinflation and need some excuses to raise rate without mentioning hyperinflation. So they came up with this bullshit excuse of employment number.

    If the price of oil keeps getting higher, this could unleash hyperinflation and a banks bankruptcies. This is how I see it personally.

    • NotSoSure
      Jan 6, 2017 at 12:53 pm

      The Fed is afraid of hyperinflation? LOL. In which world are you living in? The end goal of the Fed (post Volcker) is always hyperinflation. What they are afraid of is when. Once they are ready they’ll throw the switch.

      Hyperinflation is exactly how real wages will ALWAYS fall behind real inflation.

      • mynamett
        Jan 6, 2017 at 12:57 pm

        Hyperinflation destroy confidence in currency. No confidence in currency no International trade. The elite knows that too. Fed wants inflation not hyperinflation,

      • ANON
        Jan 6, 2017 at 2:18 pm

        Deflation does that far more quickly, and far more comprehensively, and that’s what “they” are afraid of.
        I would start worrying about hyperinflation when I see the EU printing (instead of retiring) the 500€, the US following suit with a new&improved 500$ bill, and when instead of banning cash (which does not require much “elite” conspiracy planning since cash is already *extremely* scarce compared to the quantity of promises floating above it on Exter’s Pyramid, demanding their pound of flesh), they start printing cash like crazy, *and* giving it to the population somehow, *and* convincing them to spend it instead of destroying more credit by paying it back, or defaulting and hoarding the cash.

        And even then, they have lengthy printing season ahead, and might not even have the supply chains in place to source all the materials -printing physical government promises is so hi-tech that it boggles the mind-.
        So, basically, for the moment, you can count only on this for the “hyperinflation”, the rest of the hundreds of trillions in promises is made up of bits on computers :) :
        https://en.wikipedia.org/wiki/Circulation_(currency)

      • economicminor
        Jan 6, 2017 at 9:37 pm

        I think there is another concurrent story here. The government needs unreported inflation so that they can continue to reduce their payments to SS, government wages and pensions and all other government programs.

        I don’t see the FED wanting either hyper inflation or deflation.. As gradual inflation is a mechanism by which wealth is transferred from the workers to those who control the assets and currency. Which has been their modus operendi since Volker.

        As for the reported wage increases.. my guess is that it is mostly fantasy.. I personally don’t know any wage earners who have had any increases and almost 6% in a couple years??? Not to my personal knowledge.

        Why would they publish these numbers? Probably to keep the anger at bay and to keep the general public thinking that the economy is actually getting better. Keep hope alive.

        • Randy
          Jan 7, 2017 at 2:35 pm

          All their numbers are a lie.
          No ‘real’ decisions can be made based on their cooked books.
          The ONLY ‘out’ for the consumer is to live debt free.. . .and that’s not going to happen. . . . EVER!

    • Ian Bannister
      Jan 6, 2017 at 12:57 pm

      Rest assure oil price will not go above $60, OPEC members need cash to prop up their economies and the fracking industry need dollars to service their debts. Therefore they will pump more oil above their quotas and add to the already oversupplied low oil demand.
      More of a worry is the bonds market, if some of that $43 trillion in bonds finds it way back to the US then you will have hyperinflation. Every man and his dog is busy selling US Treasuries, also a market warped by Chinese desperation to get Yuan capital out of China…..

    • Lee
      Jan 6, 2017 at 3:09 pm

      “This new printed money goes directly into non productive asset such as housing”

      Yeah you gotta keep dem der ‘wage slaves’ out in da street……

      Excess housing is non-productive. Housing that meets the basic needs of a population is productive.

    • Frederick
      Jan 8, 2017 at 8:13 am

      I agree with the hyperinflation scenario eventually but only after a lot of defaults and a period of huge deflation

  4. Jas
    Jan 6, 2017 at 12:48 pm

    Ah, debt! Every time I read an article like this, it takes me back to a very insightful book I read a couple years ago written by my favorite (present day) philosopher Slavoj Zizek. Zizek wrote about this in his book Trouble in Paradise: From the End of History to the End of Capitalism ; pg 46 “A decade or so ago, Argentina decided to repay its debt to the IMF ahead of time (with financial help from Venezuela). The IMF’s reaction was on the face of it surprising: instead of being glad that it was getting its money back, the IMF (or, rather, its top representatives) expressed their concern that Argentina would use this new freedom and financial independence from international institutions to abandon tight financial politics and engage in careless spending. This uneasiness made palpable the true stakes of the debtor/creditor relationship: debt is an instrument with which to control and regulate the debtor, and, as such, it strives for its own expanded reproduction.”

    • Paulo
      Jan 6, 2017 at 1:17 pm

      regarding Jas’ post: “debt is an instrument with which to control and regulate the debtor, and, as such, it strives for its own expanded reproduction.”

      My strong union minded father-in-law always referred to personal debt as ‘Economic Servitude’. Thanks to his wisdom and guidance about debt, I have never had any beyond a modest mortgage. We might not be rich in our house (like the Donald), but we have never had debt or been driven into bankruptcy as a result. I am 61. In one month I celebrate my 4th year anniversary of retirement. Now, off to the shop to build some more furniture. I just got back from a walk and my wife is at swimming. We will have lunch together (at home) :-)

      Debt is sometimes necessary, of course. But for simple profligate consumption it is an evil, imho.

      http://www.freemansperspective.com/servitude-freedom/

      • Jan 6, 2017 at 2:27 pm

        WONDERFUL POST , and very well said.

        Thank you for the reinforcing link, also

        SnowieGeorgie

        • economicminor
          Jan 6, 2017 at 9:43 pm

          I agree, debt is the slave master and anyone who wants freedom needs to get out of debt and live within their means.. I did for most of my adult life and have prospered even in a very poor rural community.

      • Ivy
        Jan 7, 2017 at 11:23 am

        We are raising our kids to understand the different aspects of credit. If they have to use a credit card, then they have to be able to pay off the balance monthly. They observe others in their cohort that have to have the latest whatever, and then lament that they have no money left over, which is a good object lesson.

        A wise man once said “If you can’t pay for it, you can’t afford it.”

  5. Chicken
    Jan 6, 2017 at 12:54 pm

    Great explanation Wolf.

    The Lord giveth and taketh away, doing God’s work.

  6. Chicken
    Jan 6, 2017 at 1:04 pm

    “The only new manufacturing plant that was build with government money was tesla car factory.”

    There’s an arms-length list of alternatives subsidies, here’s another: “Solyndra misled government to get $535M solar project loan”

    A drop in the bucket compared to the Pentagon’s $1T budget used for demolishing cities and raining bombs down on hospitals.

    • polecat
      Jan 6, 2017 at 3:10 pm

      which Pentagram budget are you referencing … white or BLACK ??!!

      • Chicken
        Jan 6, 2017 at 5:37 pm

        Both, no accounting for the total tab foisted on underemployed taxpayers.

        What would happen if that $1T was earmarked for something productive?

        • walter map
          Jan 6, 2017 at 7:58 pm

          “What would happen if that $1T was earmarked for something productive?”

          You could use that trillion per year to create societies that are just, peaceful, prosperous, sustainable, and enlightened.

          I’m sorry, did somebody just say something? I seem to have nodded off there. I was having the strangest dream . . .

        • Lee
          Jan 6, 2017 at 8:18 pm

          Yeah right – those days are long gone.

          When was the last time the Feds ever built anything big?

          Highways? Dams?

          Where did all the money go from the non-defense side of the budget?

          I’ve always wondered if the Feds had just given some of the money to people to put solar electricity systems on their houses……………

          Say $10 billion a year (chicken feed to the Feds) and at US$5000 or so a system. That would have put some 16 million systems out there in the eight years of the Zero presidency.

          No doubt there would have been fraud, graft, and the usual corruption doing the plan, but at least there would have been something to show for it.

          And as far as the defense side of the equation is concerned, modern wars are not fought in methods from the good ole days where the defeated party would have been sacked, looted, and totally destroyed.

          No doubt that in the ‘good ole days’ the winner more than recouped the cost of the war from the loot in many cases.

          That is why ‘modern wars’ drag on for so long now – we have ‘rules’ and have to ‘play nice at war’………….they never end.

        • Edward E
          Jan 6, 2017 at 8:24 pm

          …And now we all maybe get to pay for a wall. Trump is asking Congress, not Mexico, to fund the wall. I just have to admit, he is way better at telling his supporters to go fuck themselves than I am.

  7. FDR Liberal
    Jan 6, 2017 at 1:07 pm

    Wages NEVER keep up with inflation.

    Below is link re: real inflation and not the pablum dissemintated by the FED’s PCE or the Commerce Dept.’s CPI.

    http://www.chapwoodindex.com

    • Smingles
      Jan 9, 2017 at 12:31 pm

      If his numbers are correct, then the US economic output today is about 20-25% smaller than it was in 2010. Which is laughably stupid.

      Common sense disproves the Chapwood index, but don’t take my word for it. Look at the any of myriad of criticisms of it.

      Then there’s ShadowStats, which literally just takes CPI and adds a constant number to it that was made up out of thin air.

  8. Si
    Jan 6, 2017 at 1:12 pm

    I listened to that ex Goldman maggot Jim O’Neil on BBC radio 4 today talk about how great globalism is in reducing poverty. To be fair he did give a hat tip to the fact that the workies should get more consideration.

    He sounded very rational and reasonable. I honestly think he believes what he says (which is partially grounded, but he can’t see that what he looks at his highly selective to support his thesis).

    Inflation – low (lets not look at housing, education and health care)

    Employment – high (forget all the out of work who have lost all hope so don’t count and the fact that most are in part time temporary jobs)

    His go to argument supporting globalism is China. When that tanks wait and see all his GS alumni cockroaches beg for bailouts.

    • Chicken
      Jan 6, 2017 at 5:28 pm

      Producing poverty as a result of billionaire bailouts.

      • John M
        Jan 7, 2017 at 1:03 am

        Chicken

        You’re succinctly nailed it.

    • Bob
      Jan 7, 2017 at 10:09 am

      Globalization is like a Texas Hold’m party. You start with many tables, then the winners at those tables merge into a winners table, then the chips are finally transferred to the ultimate winner – the one with the best combination of luck and skill.

      After you lose in Texas Hold’m, you stand aside and watch the winners play it out, just like in globalization.

      The game is efficient in that it identifies the best player, but the “all or nothing” results are not satisfying to very many people.

      The only way to keep the game going longer is to make sure the cards are not marked and to re-distribute winnings.

      • economicminor
        Jan 7, 2017 at 10:50 am

        Yep, The ole Monopoly Game… and we are being pushed out as the biggest winners take it all…

        And in the end, the game is closed, and the board folded or a new game started with all the money being redistributed…

        Oh, just sounds like so much fun for us golden agers.

  9. Maximus Minimus
    Jan 6, 2017 at 1:39 pm

    Wage increases are irrelevant. The true measure is housing prices to wages ratio, and I do not mean the bogus rent index in the CPI. Most people live in houses, not in investment assets.

    • Al Loco
      Jan 6, 2017 at 2:27 pm

      Yes. If you look on usdebtclock.org, the scariest numbers isn’t the out of control climbing debt. It’s the median wage and median home cost comparison of now versus 2000. Check it out.

      • John M
        Jan 7, 2017 at 1:13 am

        Al Loco

        Nice spotting there on that one. In the Roman Empire they didn’t have the internet. Back then it took 100 years to go from pure silver coins for paying the legions salaries to silver plated bronze coins for the same legions. We’re 46 years now away from the anchoring of a gold standard that ended in 1971. I doubt it will be long now before everyone figures it.

        In the 1790’s the masses in France came after the Marie Antoinette’s and the “Elites” of that time with pitchforks. This time around they’ll be leveraged up with AR-15 ghost guns.. If the likes of the GM and Ford CEOs can’t see that by exporting all the middle class jobs ex – USA then eventually you’ll get the revolutions. That was the whole point of taking European History lessons. To learn from HISTORY.. Alas they never learn..

        • Petunia
          Jan 7, 2017 at 8:16 am

          When the uniformed police defended the elites against the Occupy movement, I laughed at their stupidity. They had no idea that their pension money was being stolen by the people they were defending. Let’s see if they learn anything from Dallas and Chicago.

  10. Greatful again
    Jan 6, 2017 at 1:48 pm

    Considering how both gov and the private sector rely so heavily on debt and the expansion thereof….I would think the far greater concern of the Fed would be the cost of sustaining and adding new debt to the system. The data over the years seems to indicate that the loss of purchasing power in the consumer market has been mitigated by the expansion of debt, not wage increases. Maybe I’m missing something?

  11. P
    Jan 6, 2017 at 1:49 pm

    Wolf – big fan of the blog. Personally I think workers/consumers need the bankruptcy option to be brought back. The Fed will never be on the side of workers/consumers

    • polecat
      Jan 6, 2017 at 3:14 pm

      Oh, yeah ….. tell that to Chucky Schumer et. al. … I’m sure they’ll get right on it ! /s

  12. d
    Jan 6, 2017 at 6:03 pm

    There is some small wage inflation.

    What the fed is not considering, and should.

    Is that many Americans still earn considerably less today, than they did in 08 after the wage inflation, and that they have to deal with then eight years of gross inflation of many unavoidable costs that are outside the inflation stats, fuel muni taxes, ETC, Etc.

  13. Chicken
    Jan 6, 2017 at 6:25 pm

    Millenial terrorism?

    “Shooter Esteban Santiago Ruiz (born 1990) had a gun checked in his baggage and had declared the firearm, law enforcement sources told CNN.”

  14. London
    Jan 6, 2017 at 11:37 pm

    “Since late 2014, year-over-year average hourly wage increases have been significantly higher than year-over-year consumer price inflation”

    Isn’t that due to the crash in oil prices and the rallying of the dollar against China ? (where most worker’s stuff comes from).

    https://en.wikipedia.org/wiki/File:Brent_Spot_monthly.svg

    It appears that we have a temporarli depressed cpi due to external deflationay factors (overcapacity) , rather than innate growth within the economy that would allow the Fed to hike.

    This is the first times I’ve ever heard that the Fed’s role is to keep US wages depressed vs foreign competitors .

    Although I am aware you often joke, newcomers to your site may take your deadpan humor as fact.

    • Jan 7, 2017 at 1:17 am

      This is not a joke. Real wages are impacted by two things: nominal wage increases and inflation. Currently, nominal wages are jumping. Inflation is rising too (the impact of the oil bust on inflation is largely in the past), but it’s rising more slowly than nominal wage increases. So for the Fed, it’s time to act.

      If you look back over the past few decades, you’ll see that the Fed reacts much more quickly to wage inflation than consumer price inflation. By contrast, it NEVER acts to tamp down on asset price inflation.

      If you want to know when the Fed gets serious about tightening, watch wage inflation.

      • d
        Jan 7, 2017 at 3:40 am

        Yes various elements have driven down real American wages and the fed intends to keep them that way as long as possible.

        However the fed is reacting to false/misconstrued numbers, so the fed action’s could cause problem’s.

        Interest rates are to low and need to rise, but slowly. Or huge problem will result. 2 or 3, 25 BP’S this year, would actually be a huge increase 150% compared to the last decade.

      • Bob
        Jan 7, 2017 at 9:46 am

        Trumps polices will add more fuel to the wage fire. A border tax on imports combined with restrictions on immigration will severely limit supply of foreign cheap labor. Businesses and consumers would take a hit, but U.S.-based wage earners would benefit. People know this and that’s why Trump was elected. Globalization benefits the few, but is harmful to the many.

      • JB
        Jan 7, 2017 at 2:50 pm

        my initial reaction to your narrative was similar to LONDON’s so thanks for the reaffirmation .
        Is wage inflation included in the feds dual mandate ?
        and does rising interest rates really decrease wages?
        the economy needs wage inflation . if the feds increase
        rates to decrease inflation , this would increase real wages. IT seems almost unconscionable the feds would side with businesses over employees . but
        merits further data points . GOOD observation WR!

  15. William Taylor
    Jan 6, 2017 at 11:37 pm

    Last year when the White House was raving about the 2% increase in wage income, a quick calculation showed that the minimum wage was responsible for all of that 2%. States like California increased the minimum wage from $8 to 9 on 7/1/14 and from $9 to 10, a 25% increase in less than 2 years. The total of that increase as a percentage of total wages resulted in an increase of 2% overall.

  16. Petunia
    Jan 7, 2017 at 8:06 am

    Macy’s, Sears, Kmart, are closing some stores. The Limited is closing all stores. People are struggling to pay for housing, groceries, and medical bills. Does any of this look like wages are rising?

    Twenty years ago most people would get a week’s wages as a Xmas bonus. Does anybody know anybody who got a Xmas bonus now?

    • Frederick
      Jan 7, 2017 at 9:29 am

      Petunia you’re correct I made more as a finish carpenter in the eighties than a lot of guys are earning today Illegal immigration has crushed wages in construction in NY area anyway I just cannot understand HOW anyone can claim wages are rising Maybe for lawyers and civil servants yes

      • economicminor
        Jan 7, 2017 at 10:46 am

        I know that in Oregon civil servants wages have not gone up as much as reported inflation for decades. I doubt that many cash strapped states or local communities have been able to raise the civil servants anywhere except right around the belt way but that my is anecdotal from my readings.

        That has made things even worse for most communities as the good people leave, leaving the less skilled and new hires to deal with complex rules and issues.. Which has helped make government even more dysfunctional as years proceed along.

        The under reporting inflation is the cause of a lot of this income shrinkage as it is with SS, disability, including the Veterans, Medicare, Medicaid and government pensions. Most government programs, without addidtional Congressional funding are tied to Cost of Living Adjustments or COLAS.

    • Jan 7, 2017 at 11:22 am

      I work for a warehouse distributor, small company about $100M gross sales ( very low margin products ). Three classes of workers{ drivers, warehouse people and back-office administrators. There is a lot of immigrant labor in the fist two classes, very hard-working people.

      All workers got a week’s bonus for Xmas, and I think many that have been here five or ten years got a full two weeks.

      I went back to work because my retirement income faltered. I am rebuilding that income base now, and it will be back to where it must be ( to support us through age 90 at least ) by mid-year 2018, at the latest.

      This is a good company with no malingerers, and I am sure all were as pleased as I was to get the week’s pay bonus.

      It is difficult to have to work until age 66 or 67 — but then — if I can fully retire by then, I will definitely be luckier than most.

      BTW, I will carry our mortgage right up until death ( the “mort” part of mortgage, LOL ) but that is already factored into the retirement income requirement we have.

      Oh, and one last thing — I think that America has had too many immigrants in recent decades. I read in Time magazine last fall that 40+ percent of all Americans were foreign-born — a number I have not checked. Too many not-quite-integrated inhabitants is not a good recipe for a stable society, but time does work that out . . . .

      I know many many native-born Americans that are malingers — too depressed to work, collecting SSDI — close friends, neighbors and relatives. All gaming the system.

      All immigrants that I know personally are hard-working and productive. None are collecting benefits that I can see, and I know of only one that gamed the system ( with a faked injury ).

      Well, I wandered from my main point — all of us Americans at my warehouse, immigrant and native-born got at least a week’s pay bonus, very nice.

      SnowieGeorgie

    • Petunia
      Jan 7, 2017 at 11:47 am

      You can add Neiman Marcus to the stores not doing well. They just cancelled their IPO due to a decrease in sales this past quarter. It seems the wages are not increasing in tony Dallas.

    • Lee
      Jan 7, 2017 at 8:20 pm

      Yeah, the big end of town gets their Christmas bonus, volume/sales bonus, and maybe even a small cut of the ‘profits’ where I work. They also make four or five times as much as we do for doing not much either.

      Us, ‘scum on the bottom of the pond’ get wages docked if we sign out one minute early or even more if the higher ups are not around to turn on the computer to sign in when we start work in the morning. They can come in late, leave early, and take long lunch breaks as well.

      Miss your morning break tough s**t. You can’t make it up either. Work though part of lunch – hey par for the course.

      Not to mention the other ‘perks’ such as conferences, ‘training’, attending ‘work related events’, and taking home whatever they can from work.

      What a wonderful place – hey at least I have a job.

  17. Winston
    Jan 7, 2017 at 10:54 am

    “One of the Fed’s jobs, in addition to inflating asset prices and keeping the biggest banks from imploding, is to make sure US employers have access to cheap labor so that they can maximize their profits and at the same time remain competitive with cheap-labor countries.”

    The only labor in the US that will compete with foreign slave wages is automation. As pointed out in the humorous prank video by The Yes Men, even unpaid slave labor in the US could not compete due to the need to house, feed, and provide medical care at US prices for those unpaid slaves.

    The $4/day legal minimum wage in Mexico provides a strong incentive to cross the border to build our homes, fix our roofs, tend our lawns, work in meat packing plants, etc., those immigrating having no ability to complain about working conditions and relying on the taxpayer for medical care, food subsidies, etc., very convenient for their employers.

    Businesses gets cheap, hard working labor that can’t complain, providing them no benefits, pols get a rapidly reproducing and growing voting block dependent on government for handouts. Thus, nothing but lip service is paid to the illegal entry issue and a stupid, hugely expensive, and likely ineffective wall is proposed to the proles as the phony fix rather than simply changing a few words in the US code, the wording of which is totally under the responsibility and control of the POTUS, pertaining to the hiring of aliens to eliminate an employer loophole one could drive a 20 ton truck through, that change being one that would actually fix the problem virtually overnight.

    • economicminor
      Jan 7, 2017 at 11:16 am

      I hope your proposal includes an exception for agricultural workers or the only food on your table will be carbs or extremely expensive done by boutique farms.

      And of course economics is a balance sheet.. so get rid of the cheap over the border labor and the cost of every thing they do goes up in cost. So when your home needs a new roof, not only will the roofing cost more but expect the labor costs to quadruple. So today a replacing a roof can cost $5-10k or more, just expect that when you have gotten rid of the inexpensive labor you might expect that same roof replacement to cost $15-40k. Along with any landscaping or painting or any repair work.

      Then we really have inflation… which again as I keep pointing out, inflation is a real mechanism for transferring the wealth from the workers to those who control the money and assets.

      There is no silver spoon or magic trick that brings an economy back into balance when it is so far out of balance. If it could be done, it would take decades and real geniuses with a heart and compassion. As it seems that those who focus on making lots of money and have power seldom have any compassion and have hearts of stone.

      • Petunia
        Jan 7, 2017 at 11:54 am

        A few weeks ago strawberries were $8.99 a pound in the market. A package of cutup fruit salad is even more expensive. How exactly are we saving money with immigrant labor? I sure can’t tell at the supermarket.

        • economicminor
          Jan 7, 2017 at 12:55 pm

          If you think that is expensive just wait until we have to hire legal employable people to pick them. And the apples, pears, grapes for wine, blueberries, lettuce etc..

          From what I see and read, most employable Americans are already working. Oh we have lots that aren’t working but there are lots of drug addicted people and people with disabilities including many returned vets from so many conflicts with mental issues. Even in my poor rural area there are signs up for Help Wanted. You can entice the existing workers away from their existing jobs with more money and better benefits but that becomes a spiral of even higher inflation than what you are complaining about..

          This unreported inflation you complain about is what the FED and our government has been attempting to create forever and especially since the 2009 crash.

        • Jan 7, 2017 at 1:00 pm

          Strawberries in the middle of WINTER? Probably from the Southern Hemisphere, shipped thousands of miles. That price has nothing to do with immigrant labor, but with buying strawberries in the middle of winter!

          There is seasonal produce out there now, such as apples, pears, citrus, and the like. Stick with that in the winter and eat strawberries when local growers produce them.

        • Willy2
          Jan 8, 2017 at 1:40 am

          – Never heard of the drought in California ?
          http://droughtmonitor.unl.edu/

        • Jan 8, 2017 at 1:52 am

          The drought is over. Northern California is getting doused. Even Southern California is getting some rain. But the strawberries won’t be ripe till April or May.

        • Willy2
          Jan 8, 2017 at 2:03 am

          – Did ocean water temperatures on the West coast go up dramatically ? Then and only then I’ll believe the drought is over.
          – One report predicts that the californian drought could last for another say 100 years.

        • Jan 8, 2017 at 2:13 am

          Look, I live in Northern California. Tons of snow in the mountains, dumping snow right now, raining here in San Francisco, flooding forecast for Sunday. Since rainy season started in September, it has been very good! Lots of rain. The peak of rainy season is Jan and Feb. So far it looks great. Everyone is immensely relieved. There is GREEN!

          Southern Cali was left out earlier in the rainy season, but now getting rain too.

        • Frederick
          Jan 8, 2017 at 8:25 am

          That’s one reason I moved overseas I was tired of getting raped for simple staples like bread , fruits and vegetables Six dollars for a loaf of bread is criminal as is nine bucks a pound for strawberries

      • Sporkfed
        Jan 7, 2017 at 12:08 pm

        People forget that businesses usually charge what the market will bear, regardless
        of any labor savings they may get from immigrant labor. At times they may keep prices low to gain market share, but once they are satisfied with the market share, prices will go up with the additional profits going to the owners. The savings due to lower labor
        costs are quickly charged to the taxpayer in the form of higher safety net costs.

        • economicminor
          Jan 7, 2017 at 1:07 pm

          You may be right to an extent of what the market will bear but the fact that consumer debt continues to increase much faster than incomes indicates to me that this is being fueled by the banksters.

          And you can only squeeze so much blood from a turnip.. Or water from a rock..

          Also, everyone, including those at the top seem to live or spend everything they receive as income. Everything is leverage. If a dentist make a good living, he then goes out and borrows money to build a new office thus spending much of his income on payments. Even the farmers who have a good year go out and buy on time new equipment or the farm down the street..

          Take from one and it goes to some other place. Not often even a productive or really beneficial place. Why does a CEO need to own 5 or 6 estates and a few yachts and a couple of air plains… Instead of paying their workers more? Just because they can?

          Getting rid of the cross border workers will not make my life better as I know my costs will rise. And as costs always rise faster than wages, it won’t make anyone’s life better. Except the Banksters who will loan out more money making more for themselves…

          The policies of the government and the FED have only exacerbated the financial instability.

      • Frederick
        Jan 8, 2017 at 8:21 am

        Economic minor I replaced hundreds of roofs in my day and I can tell you we don’t need those guys If they weren’t here plenty of Americans would be roofers believe me As for agricultural they have always had migrant workers on temporary visa for that

        • economicminor
          Jan 8, 2017 at 6:07 pm

          I sure don’t see to many younger people in the trades around here. Our system has funneled most all our energetic youth into college and not the trades. So around here there is a tremendous shortage of people willing to do physical labor other than the immigrants/migrants.

          When I was young, the trades were not dissed and looked down upon as they are today. Today every one thinks you need a college degree to work at fast foods. If you call for a tradesman today most all are either in their late 40’s on or migrants/immigrants.

  18. Tom Kauser
    Jan 7, 2017 at 12:17 pm

    5- stars for the opening quote!

  19. Chicken
    Jan 7, 2017 at 7:20 pm

    Interesting that as robotics replaces workers at a frantic pace and some large percentage of jobs will no longer exist in coming years, we’re facing wage inflation.

    • d
      Jan 7, 2017 at 7:54 pm

      You aren’t facing REAL wage inflation.

      The numbers are being interpreted to claim you are.

      Them % increase, this year, can be accounted for, in the minimum wage legislation costs, other wages are stagnant or still deflation.

      Real disposable, for wage, and lower salary workers, is still dropping.

      I am not cynical enough to claim, the fed wants to hike, just as P45 comes into office. As he is a republican.

      I don’t believe the FED is that politically, even when faced with an, aggressive, petulant, thin-skinned, demented, orange, professional fraudster, child, who thinks you can run the finances of the country, the same way he run’s his fraudulent company’s, about to inhabit the oval office.

      Many will claim otherwise.

  20. Justme
    Jan 7, 2017 at 9:26 pm

    A little more than 4 years ago, on Tue 13 Nov 2012 I posted the following somewhere:

    ____________________________________
    The Fed loves asset inflation
    The Fed hates asset deflation
    The Fed hates wage inflation
    The Fed cares about consumer inflation only if it drives wage inflation.

    That is the Fed in a nutshell.
    _____________________________________

    Not posting this to upstage Wolf in anyway. He probably said it even before me. An it was great to see a whole article dedicated to the topic, and with data.

  21. Edward E
    Jan 8, 2017 at 8:47 am
  22. interesting
    Jan 8, 2017 at 10:46 pm

    “especially when they exceed consumer price inflation”

    when i worked a real job that never ever happened….not ever.

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