Re: Higher Earnings That Aren't, continued

[Doug Henwood <dhenwood@xxxxxxxxx>]

john gulick wrote:

>If, on the one hand, the U.S. labor market is tight and U.S. average real
>wages have been climbing in the last year or so, and, on the other, firms
>that operate
>in the U.S. can't pass along higher costs to consumers b/c of overseas
>competition, how can it be that U.S. firms are racking up restored (if not
>record) profits ? Are these U.S.-based TNC's whose rates of return are
>higher in
>their non-U.S. operations, or is this b/c U.S. plants are purchasing inputs
>(capital goods, components, raw materials, etc.) from overseas that
>have been "cheapened" by the overvaluation of the dollar ? Something's gotta
>give (and I mean that in both senses of the expression).

For one thing, it's not unreasonable to expect a profit squeeze. And for
two, service sector wages are rising, and they're not subject to foreign
competition. According to one of the regional Fed's (can't remember which -
NY maybe?), service sector wages are a good leading indicator of inflation.
We'll soon see if they're right.

Doug