US economy woes spell trouble for SA workers

South Africans are warned not to expect much from this year's salary increases

Analysts have warned that with the American economy in trouble, global growth will slow. This is likely to impact on wage increases in South Africa. The world's biggest economy – the US – is in trouble.

Earlier today, former US Federal Reserve chairperson Alan Greenspan said the current crisis could turn out to be the worst since World War II. His remarks came shortly after Bear Stearns - the fifth largest American investment house - collapsed. The Fed cut the cost of borrowing for banks by a quarter of a percentage point. It was the first weekend action taken in almost three decades.

According to reports, other measures announced have not been used since the Great Depression in 1929 - about 80 years ago. This morning local financial markets tumbled. The JSE closed this afternoon 3.5% down with the financial sector losing 4.5%.

Ordinary South Africans are also likely to feel the pinch with below inflation wage hikes. That means they will have less money than a year ago.

"At this moment with inflation on the increase, companies can afford to hike the average worker's salary, but I think companies will be looking to lockdown, consolidate and move forward towards the end of the year when the issue would be over," says financial analyst William Ridge.

America's problems have caused the dollar to weaken. Gold touched a new high of $1 032 an ounce earlier today. Brent crude also hit a high of $110 dollars a barrel. However, the rand has not been able to take advantage of the weaker dollar. Earlier today it touched R8.14 to the dollar.