“Employees Have the Upper Hand Again.”

“Employees have the upper hand again,” writes a friend who runs a medium-sized, fast-growing company in Cleveland, commenting on our “No Inflation Here…” report last week.

Specifically, he tells me:

From 2001 to late 2005 if I was looking to hire an engineer or sales person, I could always get them to come for $5,000 to $10,000 less than a comparable shop, with the promise of a quick review and bump if they produce.

But that was then, and this is now:

I’ve lost 2 people that had accepted offers from me but after giving notice to their current employer got offers at $10,000 more, and took them.

As for the Greenspan Adjusted-To-Exclude-Rising-Prices Consumer Price Index, he writes:

Forget what’s happened to my rent, my health insurance, my utility bills, which is 20% of my costs—the pressure on salaries is the big deal I’m seeing.

Only yesterday the Treasury market rallied on a lower-than-expected number from the—I am not making this up—National Association of Home Builders/Wells Fargo Index of Builder Confidence. (How is this builder-gloom possible, when all the public home builders express such great confidence in the housing market?)

Seems like investors are looking for any sign of weakness in whatever index-of-the-day might suggest some incremental weakening of the job-creation machine that is the U.S. economy in order to declare a top in yields and an end to the Fed’s endless tightening.

But if a businessman in Cleveland—not San Jose or Phoenix or Fort Myers or Arlington or Manhattan, but Cleveland—is losing new hires to bidding wars, it may take more than a weak number from the 48th Federal Reserve District Prices Paid for Intermediate Raw Materials Third Derivative Seasonally Adjusted Smoothed and Revised Index to slow things down.

Like a few more rate hikes than the bond bulls expect.

Jeff Matthews I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.