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> The gains in wages and employment that the hot labor market is delivering seem very large compared to the modest cost imposed by a temporary period of inflati
by soared 4y ago
> The gains in wages and employment that the hot labor market is delivering seem very large compared to the modest cost imposed by a temporary period of inflation.
Sentences like that seem crazy to me - where is the hot labor market money going outside of faang? In my circle nobody is getting raises that overcome inflation unless they switch jobs, which is only viable every couple years at a max and has diminishing returns over time.
Separately, is inflation temporary? I had thought price increases don’t return to their prior levels with the exception of gas, and seemingly a dozen eggs.
- dangwhy 4y agoI think hot labor market is outside of white collar jobs. Thats why i am seeing with my family members who dont' work white collar jobs, demand is unlimited.
- coldtea 4y agoFind it hard to believe this (except some regional or personal exceptions), since a lot of the demand for non-white-collar services comes from white collar employees who aren't exactly thriving and spending atm... Except if there's some thriving export industry with domestic factories on the rise!
- havblue 4y agoSome have said there's an undocumented labor shortage after the pandemic. This is, well, undocumented, so it's hard to determine actual numbers for it. Unfilled jobs aside, housing maintenance has become far more expensive.
- dangwhy 4y ago> since a lot of the demand for non-white-collar-jobs comes from white collar employees... who are spending money at unprecedented rates.
- coldtea 4y agoMany don't have money to spend at any great rate, and inflation doesn't magically make them produce it out of thin air to spend it...
- dangwhy 4y agoThats the data though. Consumer spending is at all time high.I don't know where they are getting the money.
- coldtea 4y agoIs it inflation adjusted? And even more, purchasing power across a wide range not included in inflation calculations adjusted? Because consumer spending can be at an "all time high" for things that could have been bought much cheaper 5 and 10 years ago, including basics.
- signatoremo 4y agoOf course it’s inflation adjusted. The term is “real consumer spending”. The data reported is not to make the public feel good, but to inform the policies. Politicians can always find a way to spin any number in their favor for sure. The spending has consistently remained high throughout the elevated inflation period, but is projected to go down a little bit. https://www.bankofthewest.com/Wealth-Management/insights/articles/economic-report/a-strong-start-to-consumer-spending-in-2023 https://www.bankofthewest.com/Wealth-Management/insights/art...
- joshspankit 4y agoMy uneducated guess is that they are using credit and “now that the pandemic is over we finally feel like we can live again!”
- pcthrowaway 4y agoGroceries have increased in price by 50% in the last year. That "extra spending" is coming from money that might go to savings otherwise
- catchnear4321 4y agothings can break regardless of employment status. blue collar workers fix many of those things that can’t stay broken. appliances, utilities, transportation, etc. white collar usually also means enough of a credit limit. “necessary” is relative.
- coldtea 4y ago>things can break regardless of employment status. Yes, and broken things can delay being replaced because of caution with spending
- hn_throwaway_99 4y agoThere are giant shortages in a number of job categories that can't be done remotely. Things like nursing, restaurant jobs, the trades (electrician, plumber, etc.)
- testrun 4y agoOne factor is that a lot of boomers are retiring, and those people need to be replaced, especially if they are blue collar workers.
- aeternum 4y agoMy theory is that a lot of people who had service jobs pre-pandemic switched to white collar jobs during the pandemic (since they were let go from the hourly service jobs). Many realized how shitty the service jobs are in comparison so now employers have to pay them a lot more or hope they get fired from the white collar job to fill the service positions.
- beambot 4y agoOutside of FAANG? They're all doing layoffs too...
- tekla 4y agoNo they're not. They are all hiring like crazy
- tmn 4y agoMmm that’s not what I’m seeing
- ac29 4y agoPrime age employment in the US is at an all time high: https://fred.stlouisfed.org/series/LNS12000060 https://fred.stlouisfed.org/series/LNS12000060
- 1letterunixname 4y agoWho specifically is hiring like crazy?
- svachalek 4y agoInflation, as a rate of change, is dynamic. The Fed aims for it to be about 2%, but 7% is much too high so they are ramping up rates to put a stop to that. Prices rarely go back down (consistent falling prices would be deflation, which tends to be economically disastrous as it rewards doing nothing) but the rate can fall which is what he's referring to.
- MichaelBurge 4y ago> deflation, which tends to be economically disastrous as it rewards doing nothing Why's deflation different from e.g. sitting on treasury bonds? The money was originally printed by the government, the bonds are issued by the government, so sitting on bonds does nothing except pays you for taking money out of the economy temporarily, same as deflation. If e.g. nobody would ever buy a computer because it'd be 2% cheaper if you wait a year, you could just as well argue that if bonds yield 2% above inflation you could park your money in them and wait a year and have 2% more money so nobody would ever buy anything.
- ivalm 4y agoNo, when you hold the bond the government uses that money to do things. With deflation people could hold cash which is truly not using it for anything.
- its_ethan 4y agoIsn't a treasury bond still "doing something" though? Since they are effectively loans to the government it is in theory being used to fund gov services ("doing something") so that they don't print more new money, versus sitting in a bank account where it's really doing nothing, but still increasing it's purchasing power?
- MichaelBurge 4y agoIt's 20x more dilutive to print $100 than to sell $105 for $100, sure. I wouldn't describe that as "funding government services" in the common sense, though you could argue that with a fixed dilution target it does counterfactually cause more spending and thus services. And similarly, somebody stuffing money under their mattress would be removing 20x the amount from circulation as they gain, with 5% deflation. So while one can easily imagine the 5% is financially equivalent to interest, the effect on the circulation isn't. "Remove money from circulation" seems different than simple funding of services, though. It's not even obvious there should be any difference there, if the money were infinitely subdivisible. I don't think using personal finance equivalents like funding goods and services is sufficient to explain the effect. An economist has probably written something in excruciating detail, making sure there's no shell games being played with the terms. So it's probably on me for not reading that instead of commenting here.
- tfehring 4y agoBased on preliminary BLS data, average hourly earnings are up 6.1% Y/Y in leisure and hospitality, 5.5% in utilities, 5.5% in information, 5.4% in construction, and 4.7% in mining and logging. https://www.bls.gov/news.release/empsit.t19.htm https://www.bls.gov/news.release/empsit.t19.htm
- v0idzer0 4y agoYour anecdotal evidence aside, unemployment is low and the labor market is hot. It’s mainly tech doing layoffs and that’s merely because they made so much money and grew so massive after covid they need to return to more sustainable spend levels
- Zaheer 4y agoHot labor market is referring to Unemployment rate being near record lows [1]. https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE
- coffeebeqn 4y agoTech is deflating because of the crazy hiring during COVID and the VC/exit driven “business models” suffering most from the end of free money. Most employees in the US are in a stronger position than in years. Most people also haven’t been able to switch jobs - much less for a 50-100k raise.. ever. It’s easy to get lost in your bubble
- hgsgm 4y agoPrice decease are deflation, not lack of inflation. Same as when wages rise once
- moneywoes 4y agoService industry jobs like restaurants
- tyingq 4y agoEven that's tricky, as moving from $7/hour to $15/hour means you lose things like SNAP/Food Stamp benefits, jump from a 10% to a 12% tax bracket, etc. Edit: Perhaps the ~$13k standard deduction is a better example line than the tax bracket. Just stating the wage growth isn't outpacing inflation as much as it might appear at first glance.
- jrs235 4y agoThe snap qualification might be significant. The jump in tax brackets, probably not. Only the money above the 10% bracket gets an additional 2% (12%) tax.
- zeckalpha 4y agoThe tax bracket myth gets told to labor to keep their wages down. And it sticks! People get upset about raises!
- tyingq 4y agoI wasn't suggesting upping the wage was a bad idea, just that saying wage growth at the bottom outpacing inflation isn't as good as it's portrayed. The $~13k standard deduction is another example line that gets crossed. Medicaid and CHIP maximum income is another. Meaning we could use more wage growth, not less.
- Tcepsa 4y agoI think that's an important point that too many people gloss over, and I want to emphasize it with an example. Let's say the cutoff between 10 and 12 percent brackets is at 10k. If you make 10k one year, you pay $1000 in taxes. If you make $10,001 the next year, you don't pay $1,200.12; you pay $1,000.12. 10% on the first 10k, and 12% on the single dollar that you earned in that bracket.
- rib3ye 4y agoSometimes I go to In-and-Out Burger and I see hiring posters on the front door. One year ago they offered $19/hr starting pay. Today the poster says $22/hr. Something is up.
- toomuchtodo 4y agoThrowing US centric facts. 10,000 boomers retire every day. 1.8 million people 55+ die every year. A healthy economy makes anywhere between 150,000 and 250,000 jobs per month. There is no labor shortage, only a shortage of people willing to work jobs below a living wage, due to millions of people who left the labor force, either through retirement or death, during the pandemic. https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE https://www.axios.com/2022/12/16/the-missing-workers-who-are-never-coming-back https://www.axios.com/2022/12/16/the-missing-workers-who-are... https://seekingalpha.com/article/4531829-older-workers-propping-up-us-economy https://seekingalpha.com/article/4531829-older-workers-propp...
- misssocrates 4y agoWere these jobs paying more to the previous employees than they are offering now?
- toomuchtodo 4y agoNo, they were paying less. There are less people competing for them now, hence wages rising. Supply -> Demand.
- PaulDavisThe1st 4y agoIncredible. An actual realistic livable minimum wage! Some advice I saw on a video a couple of months ago, targetting employers: "Take a look on Zillow (or wherever) and get a good feel for the median rental cost of a 1 bedroom apartment where you are based. If you can't afford to pay your employers at least 3x that, maybe you either shouldn't be in business at all, or should plan on doing it all yourself" Excellent advice, that perhaps In-and-Out Burger has taken.
- nostrademons 4y ago"... unless they switch jobs" That is how raises happen. The economy doesn't grow uniformly - new industries take off and cannibalize old industries, and the people in the old industries eventually lose their jobs while all of the gains in growth go to people in the new industries. Folks who expect better-than-inflation raises without switching into a hotter industry or moving into a new role remind me of the Parable of the Drowning Man [1]. You have to help yourself and go move into the areas that are making money. Assume that about 20% of your actual job should consist of hunting for a better job (and that > 50% should be setting you up for a better job - ideally you are learning new skills in your current job that will be useful in higher-paying positions). [1] https://en.wikipedia.org/wiki/Parable_of_the_drowning_man https://en.wikipedia.org/wiki/Parable_of_the_drowning_man
- joshspankit 4y agoWell I mean there’s a valid argument to be made that giving an employee a raise instead of finding/training a new employee is not only cheaper in the short term, but can provide exceptional ROI in the long-term (depending on industry of course). As long as the employee is producing X amount of value for the company and the value is greater than the total cost of that employee the math is simple, reasonable, and healthy.
- nostrademons 4y agoThere are pretty heavy countervailing forces in favor of standardized salary bands for everyone. Employees compare notes; it can be demoralizing to hear that the company thinks your teammate is worth 20% more than you, and it instantly leads to politicking as everybody else asks for raises. While in the eyes of the business owner there may be clearly some employees that generate more value than others, good luck convincing all the employees that some of their teammates' work is more valuable. This tendency is more pronounced in bigger companies (where performance is more illegible), but the problem with small companies is that there are wide variations in their profitability and hence their ability to offer high salaries (and this is usually less than what big companies offer, hence their ability to get big). Job-switching here is the economy doing its job and funneling resources to the activities that generate the most consumer value.
- WalterBright 4y agoThe whole point of inflation is to extract money from the economy to fund the government without tax increases. There's no way for wages to keep up with inflation. > I had thought price increases don’t return to their prior levels They don't under a fiat money system. They do under a system where the money is exchangeable at a fixed rate with something not under the control of the government.
- CyberDildonics 4y agoThis is exactly right, I don't know why it was downvoted.
- WalterBright 4y agoI expected the downvotes. The truth isn't always popular. My whole life I've been relentlessly told the fiction that inflation is caused by greedy speculators, etc.
- misssocrates 4y agoDidn't the Fed say it was transitory inflation? What changed?
- seizethecheese 4y agoLabor market is tightest in hospitality (if I remember correctly). Professional services and tech have cooled a lot.
- joshspankit 4y agoHospitality is definitely tight. Good employees have been cooked by the pandemic, the boomer generation is aging in to constant medical attention, and newbies are understandably hesitant to enter in to public-facing roles where the teams are lean.
- Eddy_Viscosity2 4y agoInflation is the increase in prices. When inflation stops then prices stop rising. Deflation causes prices to go down, but the fed hates deflation and will act against it. So, yeah, prices won't be going down.