ALARMING NEWS: WORKERS GETTING PAID MORE….The Washington Post reports that the labor market is getting a wee bit tighter than it has been for the past five years:

For most of the past five years, workers’ productivity has risen faster than their compensation. But in the first quarter, the value of pay and benefits for workers rose at a 3.6 percent inflation-adjusted annual pace, as their productivity rose only 3.2 percent.

….The data speak to one of the big questions looming over the economy. If the tight labor market leads to wage growth at roughly the same pace as the nation’s output rises, it would be welcome news for workers who have seen scant raises in recent years, would support consumer spending and help continue the economic expansion. But if wages grow too fast, it would create inflation, leading the Federal Reserve to try to put the brakes on the economy in a potentially painful manner by raising interest rates aggressively, slowing the economy.

“If the cost of labor rises much further, it’s something the Fed will really have to watch,” said Jason Schenker, an economist at Wachovia Corp.

The sad thing is that Schenker undoubtedly represents the conventional wisdom. Even the slightest indication that workers might be gaining back some of the losses of the past five years is enough to send America’s economic elite into a tizzy. It’s funny that a 30% increase in CEO pay doesn’t seem to have the same effect, though, isn’t it?

For more on this general topic, David Sirota is your man.

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