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Margins Widen at U.S. Companies as Wage Growth Lags Behind Prices: Economy - Bloomberg

Companies are improving margins and generating profits as wage growth for the American worker lags behind the prices of goods and services.

The year-over-year change in the so-called core consumer price index, which excludes volatile food and fuel, has outpaced hourly earnings for the last four months. In January, average hourly earnings climbed 1.5 percent from a year earlier, while core inflation was up 2.3 percent.

"A lot of the outperformance of profits has been due to the fact that margins are expanding," said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. "Firms have been able to keep prices intact even though labor costs have been declining."

While benefiting the bottom line for businesses, the decline in inflation-adjusted wages bodes ill for the sustainability of economic growth as consumers may eventually be forced to cut back, Feroli said. Businesses have also been slow to redeploy their profits into new hiring.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Feb 21st, 2012 at 02:25:41 PM EST
[ Parent ]
the difference between individual capitalist mythology (screw the workers) and society capitalist reality (workers spend money to keep the economy going) grows ever wider

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Wed Feb 22nd, 2012 at 03:03:50 AM EST
[ Parent ]

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