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Month: July 2014

U.S. wage growth picking up as labor market tightens

A job seeker meets with a prospective employer at a career fair in New York CityA job seeker (R) meets with a prospective employer at a career fair in New York City, October 24, 2012. REUTERS/Mike Segar

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. labor costs recorded their biggest gain in more than 5-1/2 years in the second quarter and a gauge of trends in the jobs market fell to an eight-year low last week, bolstering the economy’s outlook.

Though economists cautioned against reading too much into the rise in the employment cost index, they said a tightening jobs market suggested wage growth would soon accelerate significantly.

“If the unemployment rate keeps declining, compensation pressures simply have to increase. Most members of the Federal Reserve appear to believe it will be a lot later and not very rapidly but I am not that sure,” said Joel Naroff, chief economist at Naroff Economics Advisors in Holland, Pennsylvania.

The Employment Cost Index, the broadest measure of labor costs, rose 0.7 percent. That was the largest gain since the third quarter of 2008 and followed a 0.3 percent increase in the first quarter.

It is one of Fed Chair Janet Yellen’s favorite labor market gauges and is being closely watched for clues on the timing of the first interest rate increase from the U.S. central bank.

Fed officials on Wednesday acknowledged the improvement in labor market conditions, but said “significant underutilization of labor resources” remained.

Economists, who had forecast the employment cost index increasing 0.5 percent in the second quarter, are critical of the Fed’s views on the labor market, particularly wages, as anecdotal evidence of companies raising wages increases.

“We do expect to see a steady inflection higher in wage growth going forward that we think will call into question the Fed’s contention,” said Ted Wieseman, an economist at Morgan Stanley in New York.

In the 12 months through June, labor costs rose 2.0 percent. They had advanced 1.8 percent in the 12 months through March.

Wages and salaries, which account for 70 percent of employment costs, increased 0.6 percent in the second quarter. That was the largest gain since the third quarter of 2008 and followed a 0.3 percent rise in the first quarter.

Wages and salaries were up 1.8 percent in the 12 months through June after rising 1.6 percent in the 12 months through March. Benefit costs jumped 1.0 percent in the April-June period, the largest increase since the second quarter of 2011



In another report, the Labor Department said the four-week average of initial claims for state unemployment benefits, considered a better gauge of labor market trends as it irons out week-to-week volatility, fell 3,500 to a seasonally adjusted 297,250 last week, the lowest level since April 2006.

While overall claims increased 23,000 to 302,000 last week, that reflected difficulties smoothing out volatility from the data around this time of the year because of automobile plant shutdowns for retooling.

“The pace of layoffs is slowing, reflecting the need on the part of companies to retain more workers in the context of improving economic activity,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.

The economy rebounded strongly in the second quarter after contracting in the first three months of the year. Growth is expected to remain on a faster path for the rest of the year.

Separately, the Chicago Business Barometer dropped 10.0 points to 52.6 in July, the lowest level in just more than a year. Managers, however, viewed the downturn, which was the largest since October 2008, as a lull rather than the start of a new downward trend.

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U.S. seen maintaining solid pace of jobs growth in July

Job-seeker completes an application at a career fair held by civil rights organization National Urban League as part of its annual conference, in Philadelphia

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A job-seeker completes an application at a career fair held by civil rights organization National Urban League as part of its annual conference, in Philadelphia July 25, 2013. REUTERS/Mark Makela

WASHINGTON (Reuters) – U.S employment growth likely retained enough momentum in July to help buoy the economy for the rest of the year.

Nonfarm payrolls probably increased by 233,000 this month, according to a Reuters survey of economists. That would be a step down from June’s hefty increase of 288,000 jobs and the monthly average of 272,000 jobs gained in the second quarter.

It would, however, be the sixth straight month that employment has expanded by more than 200,000, a stretch last seen in 1997. The jobless rate is seen holding at a six year-low of 6.1 percent.

“It looks like employers are not shy about adding to head count. The recovery is on solid ground and we are expecting the data to show that in the month of July,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Second-quarter gross domestic product data on Wednesday is expected to show the economy expanding at a 3.0 percent annual pace, rebounding from the first-quarter’s weather-related 2.9 percent slump.

That pace of growth is expected to be sustained for the remainder of this year, and economists point to the solid job gains as evidence for their optimism.

“Due to the strength in the labor market, we maintain that the weakness in economic growth in the first quarter is a one-off event and the trend in the labor market better represents the current direction of the economy,” said John Silvia, chief economist at Wells Fargo in Charlotte, North Carolina.

The Labor Department will release its monthly employment report, which is closely watched by financial markets around the globe, at 8:30 a.m. EDT (1230 GMT) on Friday.



The firming labor market – corroborated by steady declines in new weekly applications for unemployment benefits and independent surveys showing increased hiring – raises the risk of the Federal Reserve increasing interest rates sooner and a bit more aggressively than financial markets currently anticipate.

Fed Chair Janet Yellen warned of that possibility earlier this month.

Most economists look for the first increase in the second quarter of next year. [ECILT/US] The Fed has kept its benchmark lending rate near zero since December 2008.

The private sector is expected to account for the bulk of the employment gains in July. Government payrolls are expected to increase modestly after increasing by 26,000 in June.

Employment in the manufacturing sector is forecast increasing by 15,000 after adding 16,000 jobs in June. Economists, however, said factory job gains could surprise on the upside as data from automakers suggest strong production in July.


Construction employment could accelerate a bit, but weak housing starts during the month pose a risk to the downside.

Some moderation is expected in services industries employment growth, led by the retail sector.

Average hourly earnings, which are closely monitored as a signal of labor market tightness, are expected to have increased 0.2 percent. That would leave the annual rate of increase at 2.2 percent, still well below the levels that make Fed officials nervous.

But gains in recent months suggest wage growth has been quickening.

“The last couple of prints on average hourly earnings have almost rounded to a 0.3 percent increase, which would be consistent with a faster annual pace of growth closer to 3 percent than the 2 percent we have been seeing,” said Laura Rosner, an economist at BNP Paribas in New York.

The length of the average workweek is forecast steady at 34.5 hours, but could surprise on the upside because of strong auto production.


(Reporting by Lucia Mutikani; Editing by Paul Simao)

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8 Samsung Phones that Apple Banned in the US In 2012

Apple Seeks Ban of 8 Samsung Phones in US

Fresh off the heels of its legal victory over Samsung last week, Apple named 8 Samsung smartphones yesterday that it wants pulled from stores and banned in the United States.

The legal verdict, which awarded Apple $1 billion after a jury found that Samsung infringed on 6 Apple patents, sent shockwaves throughout the mobile phone industry. Yesterday Samsung stock closed down 7.5% in South Korea, rival handset maker HTC, which also uses the Android OS, slipped 1.9% in Taiwan. Shares of Google also sank 1.4% in the U.S.

Apple has asked the court for injunctions on the following 8 Samsung devices:

  1. Samsung’s Galaxy S 4G
  2. Galaxy S2 (AT&T)
  3. Galaxy S2 Skyrocket
  4. Galaxy S2 (T-Mobile)
  5. Galaxy S2 Epic 4G
  6. Galaxy S Showcase
  7. Droid Charge
  8. Galaxy Prevail

Do you own a Samsung mobile device? Do you feel the verdict was fair? Are you more likely to switch to an iPhone now? Please post a comment below?

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