INFLATION IN CHINA LIKELY TO INCREASE INFLATION IN U.S.

For years Americans have come to rely on inexpensive imports from China, and China has happily delivered. Inflation, long tame in China, is roaring again and American consumers can expect to pay higher prices for Chinese imported goods this year.

From The New York Times:

American consumers could see prices increase by as much as 10 percent this year on specific products — including toys, clothing, footwear and other consumer goods — just as the United States faces a possible recession.

In the longer term, higher costs in China could spell the end of an era of ultra-cheap goods, as well as the beginning of China’s rise from the lowest rungs of global manufacturing.

Chinese imports constitute 7.5 percent of spending by Americans on consumer goods, but they make up much bigger shares of several popular categories, including about 80 percent of toys, 85 percent of footwear, and 40 percent of clothing.

While no reliable figures exist on average Chinese wages, experts say that factory wages have risen 80 percent or more in many coastal areas in recent years, with the lowest wage about $125 a month.

To reduce costs, some factory owners are considering moving to inland China, where wages are lower, or to other parts of Asia, like Vietnam and Indonesia.

MIXED EMPLOYMENT REPORT ISSUED

From The New York Times:

Two distinctly different views of the economy emerged today in a single report: the crucial employment survey issued by the Labor Department.

The economy added 166,000 jobs in October, the fastest pace in five months, according to employers. Payrolls grew at a pace more than twice what analysts had predicted, led by a sharp increase in the service sector.

But a survey of consumers showed that fewer Americans were employed last month over all. The labor force shrank by 211,000 jobs, and 465,000 Americans said they were no longer working.

The mixed employment report underscores the uncertainty on Wall Street, as analysts insist the fourth quarter will include a broad slowdown in growth and spending even as some recent reports suggest a sunnier outlook.

“You’ve got what’s good and what’s scary about this economy in this one report,” said Jared Bernstein, an economist at the Economic Policy Institute.

The estimate of job growth, which beat even the highest estimates, follows a downwardly revised 96,000 gain in September and a 93,000 gain in August, the Labor Department said. Still, payrolls are increasing at the slowest annual rate since June 2004.

The unemployment rate held steady at 4.7 percent in October, the highest rate since August 2006, but only because the survey found that more people stopped looking for work and were therefore not counted by the government as unemployed.

Manufacturing and retail jobs dropped sharply in October, underscoring analysts’ expectations that consumer spending and business activity will slow in the fourth quarter as problems in the housing market affect the broader economy.

Wages ticked up 0.2 percent, to $17.58, slightly below expectations, and are up 3.8 percent compared with those a year earlier. The length of the average workweek stayed flat at 33.8 hours.

Adding to the uncertainty about the report, most of the job gain — 103,000 of the 166,000 net new jobs — came from an estimate that the Labor Department makes each month about how many jobs were added by new businesses. The Labor Department did not actually find evidence of these jobs; it assumed they were created based on historical patterns.

WAGES INCREASING IN CHINA

From The New York Times:

Chinese wages are on the rise. No reliable figures for average wages exist; the government’s economic data are notably unreliable. But factory owners and experts who monitor the nation’s labor market say that businesses are having a hard time finding able-bodied workers and are having to pay the workers they can find more money.

Chinese officials are quick to say that there is no overall shortage of labor — rather, there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s. Factories in cities like Guangzhou advertise heavily for young workers, even while employment offices consider it a success if someone over 40 can find any job in less than a year.

“Now they’re taking workers into their early 30s,” said Jonathan Unger, director of the Contemporary China Center at Australian National University in Canberra, “but anything older than that and they think they can’t take the conditions, the 11-hour days,” as well as work on weekends, and a tedious life in factory-owned dormitories.

This lack of laborers of desirable age is hardly making China a worker’s paradise. Factory wages remain extremely low by Western standards: roughly $1 an hour for better-paid workers near the coast, compared with as little as 50 cents early this decade.

Moreover, labor regulation is weak in China, as shown most vividly this year by the discovery that brick kilns in the north of the country had kidnapped and enslaved hundreds of children and mentally disadvantaged adults, working them under brutal conditions with little or no pay.

And wages are stagnating in the middle of the labor market — workers who consider themselves too educated for entry-level jobs in a garment factory, but lacking the skills or experience to command a premium salary elsewhere. “It’s easy to find a job with not a very high salary,” said Chen Zheng, a 24-year-old auto worker and high school graduate in Ningbo. “It’s not easy if you want a higher wage.”