Growth in wages has slowed markedly since the recession and they could eventually start falling if the unemployment rate remains high, said Paul Ashworth, and economist at Capital Economics in Toronto. A Reuters poll of economists expects the jobless rate to edge down to just 9 percent in the second quarter of 2012 from 9.1 percent now.
Some analysts think the Fed's extraordinary actions to help the economy -- it has already pumped $2.3 trillion into the banking system -- make it nearly impossible for a sustained deflation to take hold.
While much of that money has not seeped into the wider economy because of weak demand and tighter lending standards, eventually it will, greasing the gears of growth and fueling inflation, said Richard Burdekin, an economist at Claremont McKenna College in Claremont, California.
"There is a legitimate concern about deflation," he said. "But to have a deflation when you have the sort of money growth we're seeing would be unprecedented."
Yet investors who believe most ardently that deflation is coming see evidence in the declines in the values of a number of asset classes. U.S. housing prices have fallen about a third since their pre-recession peak, while the Standard & Poor's stock index is down about a fifth. The Reuters-Jefferies CRB commodities index has also dropped about a third since its 2008 peak, and nearly 15 percent since April of this year.
"When you have deflation in all these other areas, it's kind of difficult to see how goods and services are going to resist the trend," said Gary Shilling, who formerly worked on the staff of the San Francisco Fed and as an economist at several Wall Street firms.