If you have a weak constitution you may want to turn on your favorite movie and not read this article. Now that you have been forewarned, here is what is going on and the natural effects, in my opinion.
Prior to the pandemic, the jobless rate was about 3.5% (according to federal numbers and data from the Survey of Consumer Expectations tracked by the NY Fed). This was a generational low! I won’t revisit the tragic job loss and business closings that occurred during the pandemic. However, here is what is unusual: The average wage that someone would want to go back to work now has risen 15.66% from a year ago. This is at a time when there are 9.2 million unfilled jobs while about 9.5 million able people are unemployed. Nonfarm payrolls are up 15.6 million above the April 2020 number, which is great; but they are still 6.8 million below the pre-pandemic level! There are too many possible reasons for this to discuss here. Suffice it to say, logic dictates that if I can get paid more to stay home than to work, then that may entice some to stay home. I believe that the economic result of this is wage inflation.
Prior to the closing of the various pipelines and other sources of energy being produced in the U.S., which made us energy independent, the cost to heat your home, drive your car, etc. was much lower than it is now. Nearly everything we wear, use, and make has petroleum used in its creation. Add to this the fact that most electricity is created by burning coal (which China produces cheaply and now has a larger part in supplying). Let’s not even get into the renewed dependence on Middle East and Russian oil suppliers. Again, logic dictates that prices for all goods and services will continue to rise unless this is corrected very soon.
INFRASTRUCTURE AND SPENDING
We still have not used a VERY large amount of the original Covid spending package approved last year by Congress. However, we apparently need to spend another $5.5 trillion for new social programs; and a little bit of what most people call infrastructure. After the Trump election, I wrote an article stating that we need new infrastructure spending, which we do need. However, if we can re-define infrastructure to include non-productive programs, then all we do is put money into the system that does not create wealth. This will diminish the value of the dollar and will create…wait for it…more inflation. If you think this will get paid for with only the “rich” getting taxed more, then you are not good at math.
Some prognosticators think this inflation is temporary. I really hope they are correct, but I don’t think so.