By the time most of you read this, the Producer Price Index for November will have been released, and if this month’s other economic statistics are any indication, the PPI will show only very mild inflationary pressure back up the producer pipeline. With the exception of energy prices, in fact, inflation remains about as quiescent as it can be, despite the fact that the economy continues to grow at a better-than-4 percent clip and that the unemployment rate has reached levels no one thought were possible anymore. If you take energy and food prices out of the Consumer Price Index–giving you the so-called core rate–prices in 1999 will have risen around 1.75 percent, which is the lowest annual inflation rate we’ve had during this entire business cycle. (Is “cycle” even the right word anymore?)
No one, of course, really knows why this is happening. But there is one remarkable statistic (which itself is difficult to explain): Since the middle of last year, the falling unemployment rate has become decoupled from wage increases. In other words, even though it’s getting harder and harder to find workers, the tight labor markets are not yet translating into wage increases in excess of productivity. This may be evidence of the new winner-take-all society, or of continued anxiety among workers, or it may be that the wage gains due to productivity are enough to keep workers happy. Or perhaps it’s just evidence that Alan Greenspan really is God. In any case, on to the Chat.
1. “Hasbro announced it was cutting 20 percent of its workforce and taking a restructuring charge of $97 million, even though it owns the U.S. license for Pokémon trading cards. Analysts blamed sluggish sales of Star Wars merchandise. For instance, reportedly only 17 Jar-Jar Binks action figures have ever been bought in the United States”
2. “Coke CEO Douglas Ivester unexpectedly announced he was retiring after just a couple of years as head of the company. Ivester, who will be stepping down in April, gave no real reason for his retirement, though he must be tempted to scream, ‘It was those damn Belgians!’ as he walks out the door.”
3. “Explaining why Pixar decided to release Toy Story 2 in movie theaters rather than making it a straight-to-video production, Pixar chairman Steve Jobs said, ‘We looked at films like Godfather 2 and Terminator 2 and said, “We can do that.”’ Ah yes: ‘I know it was you, Mr. Potato Head! You broke my heart.’”
4. “The putative recovery of the Japanese economy appears to have stalled yet again, since the latest economic data show that the country fell back into recession last quarter without the artificial pump-priming of extravagant public-works spending. The Japanese yen, though, continues to be the world’s strongest currency, raising the question: ‘Are Internet-stock day traders speculating in currencies in their spare time?’”
5. “The Federal Reserve’s latest beige-book regional economic survey declares the impact of Y2K concerns to be uneven across the country, although one lumber producer said Y2K worries had prompted customers to hold off buying wood until the new year. Apparently there wasn’t enough room in the tree rings to include ‘2000,’ so no one knows what’ll happen when ‘00 rolls over.”
6. “Presidential candidate Al Gore reiterated that he planned no new tax increases if he’s elected president, but did allow that if the economy went sour, it might be necessary to raise taxes. Hmmm. Let’s get the logic here: Economy in recession, demand weak, increase taxes so demand will be even weaker. Economy booming, people spending freely, keep taxes same so demand will keep going up. Oh right. That’s straight of Econ 101. On the planet Venus.”
7. “Linux maker VA Linux went public today at an offering price of $30, but the first trade was at $299. Don’t you have to believe the guy who bought that first block of stock was doing it just so he could say, ‘Yes, I was that dumb’?”
