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Friday, September 14, 2012

Today's Key Report

There are a wealth of statistics out today about prices and production. The key, however, is this one as reported by Bloomberg News: "Average hourly earnings adjusted for changes in prices decreased 0.7 percent in August from the previous month, the biggest drop since June 2009, today’s report showed."

The chief culprit here is the rise in energy prices, particularly gasoline. When reporters write about inflation, they usually focus on core inflation which omits energy and food. The problem, however, is that Americans cannot omit energy and food as they go about the business of living. The decrease in average earnings is staggeringly bad for a one month period. No wonder the Fed went to QE3. That plan is unlikely to work, but at least the Fed can say that it is doing something.



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