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US Economy Experiencing Wage Price Deflation Spiral

Economics / US Economy Jul 03, 2008 - 02:52 AM GMT

By: Mike_Shedlock

Economics Best Financial Markets Analysis ArticleThe deflation train picks up steam as AirTran Asks Employees To Take "Temporary" Pay Cuts .
On Wednesday, AirTran Holdings asked for temporary wage concessions from all of its employees, TradeTheNews reported. AirTran will ask all workers to accept pay cuts between 5% and 13%, and officers will take a 15% cut, effective in August, for six months.


AirTran has expended $450.0 million in wages in the past year, trimming costs through its workforce, as well as reevaluating its route structure to add capacity in markets where it sees demand and cutting capacity in markets that could not support scheduled routes.

And AirTran was not the only carrier to seek out salary sacrifices from its workforce.

In May, Japan Airlines JAL, Asia's biggest airline by revenue, said it planned a 5% salary and benefit cut for most of its employees as a means to lowering annual personnel costs by $96.4 million (10.0 billion yen).

A Japan Airlines spokesperson, Atsushi Abe, said the airline was in talks with labor unions and aimed to implement the cuts beginning in October. The cuts will be part of its ongoing overhaul of cost structure to tackle soaring fuel prices and other pressure on its earnings.

Wage Pressures Are Negative

I keep laughing at talk of wage price spirals. Even the United Auto Workers' union has agreed to slash wages for new employees by 50%. Now the airlines are at it. More companies will follow suit. It should not be long before cities and states ask for and get wage concessions. Count on it.

Right now we have an accelerating Downward Spiral In Jobs , as Deflationary Hurricanes Hit The U.S. and U.K.

Amazingly people keep telling me this is a repeat of the 70's and 80's. Clearly it's not.

Where's the wage price spiral? Where is the ability of businesses to pass on costs? If AirTran could pass on costs why doesn't it? Does anyone think GM's announced price hikes will stick? Heck they have failed already with huge incentives.

In an 80's flashback spirit, I have to ask "Where's The Beef?"

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

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