May 20, 2005

Rising prices and stagnant wages.

We just ran into this report on how prices in the US have been rising faster than the wages of many workers. Over the last year, average hourly earnings have risen 2.7 percent, but the cost of consumer goods and services has gone up by 3.7 percent. If you're a minimum wage worker, especially, this is a problem. But anyone who makes less than six figures is probably feeling at least some of the pinch.

But one part of the article really got this magpie's attention:

The uptick in inflation has caught the attention of policy-makers at the Federal Reserve, who have raised interest rates eight times since June to head off price pressures.

But because most of the inflation comes from higher energy prices, which are notoriously volatile, many of the people steering the nation's economic boat are unruffled by the rise.

They look at a narrower inflation measure that excludes food and energy prices. That gauge is up a milder 2.2 percent in the last year. [Emphasis added.]

"I'm optimistic that we're on the right track and that inflation isn't on a rising trend," Fed Governor Donald Kohn said this week.

Translation: Since our main infation measure is giving us 'inconvenient' results, we're going to rely on a different one that gives us numbers that are better politically. Besides, who cares whether wage-earners have problems with food and energy prices, anyway? If those people were important, they wouldn't make such paltry wages.

Via Reuters.

Posted by Magpie at May 20, 2005 02:42 PM | Economy | TrackBack(1) | Technorati links |