Today the stock market was surprised when the Department of Labor released January employment numbers that showed a larger than expected addition over 400k rather than the 150k predicted (or as some feared, -200k in job losses). Part of these numbers also showed another increase in labor costs which contributes to the inflation narrative currently driving the Federal Reserve to consider raising rates.
One thing that I think is lost in all of these discussions of rising labor costs is that part of the reason for the increase is due to pre-pandemic factors. Lest we not forget that many states and municipalities passed laws several years ago to do that which the Federal government refuses to do: increase the minimum wage. A lot of these increases were implemented in step fashion, meaning increases every January 1st or July 1st or both. Thus, when the January labor costs came in, part of the reason was that many states had implemented minimum wage hikes which tend to have a waterfall effect pushing wages up in other levels. So I for one, am still of the “transitory” inflation belief——the difference is that most people have defined transitory to mean 1 year or less whereas I’m saying it’s more like 1-2 years.
Remember that for years, we have had inflation at or below 2% per year so not only have wages been stagnant, in some cases they have been losing ground (hence the “living wage” push). To average a 2% inflation rate as the Treasury desires, I can’t see having 1 year of “high” inflation as balancing out all those years where it was below. Or am I missing something?
No comments:
Post a Comment