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Friday, August 30, 2013

What to watch: Are wage pressures building?

Story originally appeared on USA Today.

Barring unpleasant events in Syria on Friday — admittedly, a big caveat — most of Wall Street will be on their way to the Hamptons by noon, if they haven't gone earlier.

But the Labor Day weekend is a good time to think about labor, and what will happen when the nation gets back to work.

A true wage/price spiral — inflation — needs both rising prices and rising wages. If you ask for a job now, your boss will say, "I hear Wendy's is hiring." Wages rise only when there are fewer people looking for jobs.

But much of the nation's workers have lost money to inflation in the past decade, and pressure to raise wages is building. Fast-food workers are demonstrating to increase their wages to $15 an hour. Three Democratic congressmen have introduced a bill to push the minimum wage to $10 an hour, up from its current $7.25.

WAGES: Low-paid workers are losing ground to inflation

While a $15-an-hour minimum wage is highly unlikely, and a $10 minimum wage is also unlikely, both reflect wage pressure. Friday, the Bureau of Economic Analysis will release its figures on personal income, a problematic series that will give a rough idea of whether people are seeing an increase in wages and salaries.

Next week is the closely watched jobs report. No one is expecting a big reduction in the unemployment rate, currently 7.4%. But if wages start to rise and unemployment starts to fall, the Federal Reserve will reduce its bond-buying program and let interest rates rise — in other words, it will take away the punchbowl just as the party gets started.