Wages Fail To Keep Up With Inflation

    April 21, 2005

Wages after adjusting for inflation, fell for the second straight month and did not keep up with the rise of consumer prices in March.

The Labor Department reported that costs of gasoline, food, medical care, insurance and housing all went up. The consumer price index for March increased by 0.6%. Economists were expecting 0.5%.

“The honest thing to say is that inflation has been rising for more than a year,” said John Silvia of Wachovia Bank. “It’s not roaring inflation like you saw in the 1970’s, but it clearly is rising, which means the cost of living for households is rising, and for investors, the rate of return on C.D.’s or bonds or whatever the investment is, this is cutting into your profit.”

According to an Associated Press article,

While inflation was rising, the Labor Department said in a separate report the average weekly earnings of nonsupervisory workers, after adjusting for inflation, fell by 0.3 percent in March after having dropped by the same amount in February. Real weekly earnings had risen by 0.2 percent in both January and December.

Underscoring that inflation pressures are rising, the Federal Reserve said yesterday in its latest survey of business conditions in the Fed’s 12 regions that ”price pressures have intensified in a number of districts and most report that high or rising energy prices are a concern.”

The core rate went from an 0.3% increase in February to 0.4% in March.

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