Every month there’s a jobs report, and economists line up their forecasts. This past month, economists were off in estimates by nearly 800,000 jobs. “Economists surveyed by The Wall Street Journal had expected the report to show an increase of one million jobs with the unemployment rate slipping to 5.8%.” Instead, the Bureau of Labor Statistics (BLS) only reported 266,000 jobs and revised down the previous month’s job growth.
It was a weird monthly jobs report. But perhaps the most concerning aspect is that it provided more evidence that there’s plenty of economic pressure on prices, which will juice inflation.
Towards the end of the May report, the BLS noted that wages were increasing rapidly: “average hourly earnings for all employees on private nonfarm payrolls increased by 21 cents to $30.17, following a decline of 4 cents in the prior month. In April, average hourly earnings for private-sector production and nonsupervisory employees rose by 20 cents to $25.45. The data for April suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages.”
When you’re talking about a jobs market with hundreds of millions of employees involved, that kind of movement in wages is rare and worth noticing. It tells us, as the BLS report also says, that there’s a rising demand for employees. That may be understating it a bit too. In some industries, there’s a desperate need for more employees.
In Houston, Texas, employers are hiking wages and using incentives like signing bonuses to entice potential employees. Driving through local cities here in Tennessee, I’ve seen similar. There was one Waffle House that advertised a $300 signing bonus. Other stores had similar offers on their windows, with unstated offers of signing bonuses and other perks.
In other words, the demand for employees is there. The April jobs report not reflecting that kind of demand is concerning.
Part of the issue is that people are getting hired, but that jump in employment is getting offset by other industries shedding jobs. Businesses that thrived and staffed up because of the pandemic are now having to scale down to pre-pandemic levels. The Wall Street Journal notes:
Food and beverage stores—the supermarkets and such that saw sales jump as Americans cooked more at home—shed 49,000 jobs last month. Courier and messenger services, which have been busy delivering packages throughout the crisis, cut 77,000 jobs. Temporary-help services, to which many employers probably turned in lieu of making permanent hires as they saw demand go up as a result of the pandemic, cut 111,000 workers. The effect of supply-chain snarls, such as the semiconductor shortage, was also evident. Car and car-part manufacturers lost 27,000 jobs.
This shift is expected because we’ve spent a year with an economy on more of a pandemic footing, and now everyone has to adjust projections, forecasts and business plans.
But people are also reporting that they have reasons for not taking jobs, “lack of child care keeping many women, in particular, on the sidelines, worries about Covid-19 and enhanced government benefits allowing people to be pickier about the work they will take.”
Whatever the narrative you choose to pick on why jobs aren’t getting filled, the result is that demand for employees is driving wages up. For employees, that’s a great thing! For everyone else, that’s an increased cost that ends up getting passed on to the consumer in the form of higher prices. Or put another way, the demand for jobs is driving inflation.
It’s not just wages rising though, costs are rising across the supply chain: “Costs are rising at every step in the production of many goods. Prices for oil, crops and other commodities have shot up this year. Trucking companies are paying scarce drivers more to take those materials to factories and construction sites. As a result, companies are charging more for foods and consumer products including foil wraps and disposable cups.”
If you’ve noticed your grocery bills going up, that’s why. And that grocery bill has gone up with other costs rising too, like gasoline, housing, and more. It’s not merely industry-specific issues; prices are up everywhere.
All this information we’re seeing should lead politicians, mainly Republicans, to realize any new government spending needs to get halted. No more infrastructure bills, no more relief bills, and benefits like unemployment insurance should get wound down in the next few months. Juicing the economy with more free money will create more demand and more inflation, which will cause even more headaches.
We’re emerging from nearly one-and-a-half years of a pandemic economy, and now things are trying to snap back while politicians pour free money everywhere. These policies have consequences. We see the early results in inflation. Hopefully, that inflation doesn’t get out of control. But if we’re not careful, we could also hit issues as we had during the 1970s with stagflation.
President Biden styles himself as an FDR-like President in his first 100 days. Inflation is how he could become Jimmy Carter.