Key data (comments a mix of quotes and my summary):
“Real Median Wages were unchanged from 1979 to 2014; Real Minimum wages were the same in 2015 as they were in 1949.”
Said differently, we are experiencing a generational reset of the minimum wage across most of the United States.
Worker shortage. The factors driving this include:
- Decreased immigration (2m)
- New Business launches (1m)
- Lack of Child Care (1m)
- Covid Deaths (500k)
- Early retirement (1m)
- Not in Labor Force (1M)
Are rising prices a “Structural” part of the economy? Are they a permanent fixture, part of the outlook for the cost of goods and services for the next decade or longer? If we are to dismiss “Transitory,” then we must, by definition, embrace inflation as “Structural.”
Highlights from October 2021 CPI print:
- Goods (39% of CPI): up 8% YoY i.e. this is the driver high numbers. A few breakdowns:
- Used cars (3.3% of CPI): up 11.7% Mar 2020 - Aug 2021
- New cars (3.8% of CPI): up 43.3% Mar 2020 - Aug 2021
- Energy (7.3% of CPI): up 30% YoY, though gas still at mid-2000's prices.
- Shelter (41.7% of CPI): undersupply of housing has pushed up costs; vs. median wages U.S. housing still very affordable vs. other western markets.
- Services (61% of CPI): up 3% YoY
- More groceries instead of eating out
- Peletons instead of gym memberships
- Big screen TVs instead of going to the movies
- RVs instead of going on vacation
On the goods vs. services point: Covid created a move towards goods and away from services, e.g.:
It's the bottom quartile of workers that are pulling wages up. Consistent with "reset" of minimum wage / low paying jobs.
Also, stop trying to guess at the specifics. Analysis of structural factors (or lack thereof) is as precise as we'll be able to get.
The great resignation is primarily taking place at the lower half of the employment wage scale, entry-level jobs, or those tiers just above them.
Context on CPI, given high savings + demand combined with severely disrupted supply (chains), one would expect price impacts — especially in goods (see above) — for a period of time especially until supply chains normalize and the economy returns to a more normative stage (e.g. gets beyond the "reopening / lockdown" disucssion, analysis, and trading, which we're still in.
Also this. If productivity increases in tandem with wage gains, the net cost effect is zero.
Decent read: https://ritholtz.com/2021/11/productivity-wage-gains/
Off topic: Found this Gallup poll interesting, and confirming my suspicion:
Chart fest: https://ritholtz.com/2021/11/not-the-1970s/
Quit rate is up....
...alongside new business formation
This isn't the 70's:
