TBO.com - TBO is Tampa Bay Online

Wages Fall; Inflation, Foreclosure Rates Soar

ADVERTISEMENT

By MARTIN CRUTSINGER

The Associated Press

Published: August 15, 2008

WASHINGTON - Inflation is running at the fastest pace in 17 years, the job market is under further strain and foreclosure filings are surging.

A raft of gloomy economic data on Thursday represented a setback for those hoping to see signs of better times ahead, and it may keep the Federal Reserve jammed between rising inflation and slowing growth.

The Labor Department reported that consumer prices shot up by 0.8 percent in July, double the increase that economists had expected. The rise was only slightly lower than the 1.1 percent surge in June that had been the second-highest monthly increase in the last 26 years.

The big gains left inflation increasing by 5.6 percent over the past year, the largest 12-month jump since the period ending in January 1991.

Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February.

The biggest price pressures came in the energy and food sectors, just as they have all year. But the price gains spread to other areas, too - clothing costs jumped by the largest amount in a decade, airline fares rose sharply and the cost of hotel rooms and tobacco products also climbed.

"For the average American, these inflation numbers are very bad news. It means that their purchasing power has been cut and their wages aren't going very far," said Mark Zandi, chief economist at Moody's Economy .com.

Indeed, the Labor Department said in a separate report that average weekly wages, after adjusting for inflation, fell by 3.1 percent in July compared to a year ago, the biggest year-over-year decline since November 1990.

Some economists said they think this could be the last truly terrible inflation report. Energy prices have been falling since hitting a peak last month and food prices are expected to moderate given reports of likely bumper harvests for corn and soybeans.

But other analysts worried the July price report could be a signal that inflation is not going to moderate quickly because the long surge in energy prices is starting to spread to other sectors of the economy.

William Dunkelberg, chief economist for the National Federation of Independent Business, said the store and restaurant owners represented by his organization report that inflation is now their No. 1 problem. They are being forced to raise prices on their customers because their suppliers are hiking prices.

Separately, the number of foreclosure filings jumped by more than 50 percent in July, according to Irvine, Calif.-based Realty Trac Inc. The National Association of Realtors reported that median home prices fell in three-fourths of the cities it surveyed in the April-June quarter.

Democrats, who hope to win control of the White House in the November elections, said the new reports were evidence of failed Republican economic policies.

"Today, we got the truly shocking news that inflation hit a 17-year high of 5.6 percent," Jason Furman, economic policy director for Democratic presidential candidate Barack Obama, said in a statement.

"Families have now lost an entire decade's worth of raises to inflation as weekly earnings adjusted for inflation lie below the level they reached in August 1998."

Sen. Charles Schumer, D-N.Y., noting the news on inflation, rising jobless claims, soaring mortgage foreclosures and falling real incomes, said, "If this administration were competing in the 'bad economic policy' Olympics, they'd receive four gold medals today."

Responding to the new reports, White House press secretary Dana Perino said, "It will take some time for the economy to turn around."

She called the high jobless claims figures "not welcome" but said unemployment at 5.7 percent in July still remained lower than it has been in past periods of economic weakness.

On inflation, she said that crude oil and gasoline prices both hit all-time highs in July and have since fallen.

Loading Comments...

Email Print

ADVERTISEMENT