Kiplinger Connection
The Economy • Water Woes • Jobs & Workers

The Economy: What affects the Consumer Price Index?
Water Woes: Supply risks could affect the bottom line
Jobs & Workers: Why are more workers going part time?

The Economy
It's true, inflation statistics don’t match consumers' pain.
That's sparking charges that Uncle Sam is cooking the books ... deliberately holding down inflation figures ... to win political points and reduce government costs. Even a tenth of a percentage point translates into billions lost or gained on cost-of-living hikes in Social Security payments, interest on the federal debt, and so on.
There are flaws in the system ... government economists admit it.

But the inaccuracies aren't deliberate, sinister, or avoidable. In a $14-trillion economy of 300 million people, tracking changes in prices for millions of goods and services is no easy task.

Quality changes complicate matters. $600 today, for example, buys a bigger, better TV than it did 10 years ago. It's deflation, dampening the Consumer Price Index.
Ditto, buying-habit shifts. When consumers switch to chicken because steak becomes too pricey, the upward push on the CPI is muted. Shoppers know that steak costs more, but living costs don't change much.
To get a balanced picture ...
Multiple measurements help, clueing in government policymakers.
CPI is based on a set basket of goods and services that approximates a typical household's buying.
Core CPI removes food and energy because they can swing wildly, up one month and down another, distorting the underlying trend.
Personal Consumption Expenditures serve as a reality check, measuring changes in what all consumers actually spend month by month. At times ... when the economy is tanking, for example ... the PCE drops but the CPI doesn't, because consumers cut back sharply on buying. Most of the time, however, it mirrors the CPI, telling policymakers that the measurements of inflation are more or less on the mark.

Water Woes
With worsening droughts plaguing many regions of the country ...
Look for lenders and investors to zero in on businesses’exposure to water supply risks. Power plants, food processors, mining companies, and semiconductor makers could see disruptions that hurt the bottom line.
Water shortages loom over many companies in the Southwest, Southeast, and parts of the Midwest and Northwest. Warming temperatures that reduce snowfall in the mountains will prolong periods of drought. The spring runoff from snow in California, critical to its water supply, is forecast to be 55% of normal, forcing summer water restrictions.

Jobs & Workers
More people are working part-time, and it’s not by choice. Reductions in and layoffs from full-time jobs pushed the ranks of part-timers up by 306,000 in April and by 849,000 over the past year. The total now stands at 5.2 million, the highest level since January 1994.
For many workers, the change will last a long time. Cost cutting by firms burdened by energy prices will continue well into any recovery.

One sector that’s still hiring: Pop concert production companies. They need machinists, welders, set designers, video technicians, and more to build elaborate stages, complete with multilevel platforms, elevators, laser light shows, and high-definition video screens to enhance effects. Stages for top groups such as Bon Jovi or U2 can cost $5 million.
The concert bar has been raised because ticket prices have spiked, and concertgoers are demanding more of an experience for their money.
Plus, touring income is increasingly important to musicians, now that music sales are falling 10% a year, to $7 billion in 2008. Ticket sales rose 8% last year and will hit $4.2 billion this year.