COST OF EMPLOYMENT EDGES UP FROM RECORD LOW

CONSUMERS HAVE BEEN HITTING THE MALLS

CONFIDENCE JUMPS TO SIX-YEAR HIGH

Wages and salaries paid by businesses jumped by 1 percent in the first quarter of 1996, the largest quarterly advance since the second quarter of 1991. That was when the economy was beginning to recover from the last official recession. Perhaps this is indirectly telling us something about the magnitude of the economic slowdown we have been experiencing.

In spite of the jump in worker pay, the cost-of-employment change in the first quarter (0.7 percent) lagged slightly behind that of the fourth quarter (0.8 percent). That was because the value of worker's benefits declined by 0.1 percent, the first decline since 1982 when the Department of Labor first started keeping tabs on employment cost statistics.

The annual increase in employment cost hit a record low of 2.7 percent in the year ending with the third quarter of 1995. In 1995 the increase was 2.9 percent, and in the twelve months ending with the first quarter of 1996 the increase edged up to 3.0 percent.

What were workers doing with their wages? Well, it looks like some of them were hitting the malls. Mitsubishi Bank/Schroder-Wertheim reported today that chain store sales for the week ending April 27 were up by 1.8 percent compared with sales from the preceding week. In the week before that, the week ending April 20, sales were up a whopping 3.4 percent. It seems that consumers are becoming more confident.

Indeed, they are. Today the Conference Board released the results of its April survey of consumer confidence and revealed that its Consumer Confidence Index rose from a revised March level of 98.4 to a reading of 105.3 in April, the highest reading since May of 1990. A decline in concern about the employment situation was cited as a major contributor to the generally favorable feelings.

This follows a March-to-April drop, from 93.7 to 92.7, in the University of Michigan's consumer sentiment index. The April value of Merlin's Monthly Magical Mysterious Michigan/Conference Composite Consumer Confidence Index, obtained by averaging the Conference Board and U of M numbers, was 99.0. This marked the third monthly advance for this indicator, and was just a tad higher than the previous twelve-month high of 98.6 set back in April 1995.

Obviously, the 5000 folks surveyed by the Conference Board this month feel that happy days are here again. And, recent reports on retail sales seem to confirm this feeling. Will a slow rise from a record low in wage increases provide enough fuel to keep things expanding? Is this a recovery from the recent economic slowdown? Tune in tomorrow for the next exciting installment of Economic Indicators.

Byline: Lafferty (MF Merlin)