Employers want to hire–but, workers are nowhere to be found.
Get used to it…because there’s more where that came from.
The jobs report for the month of April, released on Friday, revealed what I’ve been predicting; the unemployment rate is going in the WRONG direction.
Unemployment SPIKED in April to 6.1% as the U.S. added just 266,000 jobs, far less than the 1 million jobs that economists on Wall Street anticipated.
That was a big miss on behalf of the Wall Street economists drinking the cool-aid. Somehow they keep forgetting to factor in the reality of human nature.
To be blunt: Americans are no fools.
After all, the government is handing out checks! $300 per week in unemployment benefits from Uncle Sam, or rather Uncle Joe, and states are often matching.
Why go to work for 40 hours a week as a dishwasher when you can make nearly the same amount, in some cases, possibly more by staying home?
Employers can’t find workers. Pretty soon, they’ll have no choice but to raise wages which will, in turn, raise prices.
Don’t get me wrong, I’m all for higher wages — but, not the higher prices that, under these circumstances, they will encourage.
Meanwhile, higher wages do not always result in better lifestyles because, instead, they have an inflationary effect and will make everything cost more.
We’ve seen this play out in real time.
According to April’s jobs report, average hourly earnings rose 0.7% in April from a month earlier to $30.17. It’s especially interesting because the majority of job gains came from the leisure and hospitality industries which tend to have lower wages because many workers rely primarily on tips. Meanwhile, one measurement of compensation that helps even out the shifts in industry employment rose 0.9% in the first quarter — the largest quarterly gain since 2007, according to the Labor Department.
Higher wages means higher prices or increased automation–neither of which is helpful for the American people and economy.
Indeed, the last two consumer and producer price index reports have show that producers are paying more for raw materials and they’re passing those costs onto consumer. Something even Warren Buffett explained to investor at the recent Berkshire Hathaway meeting.
The whiz-bang socialist economists in the Biden Administration think they can juice the economy with government handouts. But, what they’re forgetting is importance of human nature. Human beings will make logical decisions. And those decision come with unintended consequences.
In this case, the unintended consequence of what I believe could become mass inflation.
Of course, don’t tell the Fed this… or Janet Yellen, for that matter. There is still a belief that they can handle any inflation that may come our way.
But, can the markets? What happens when the markets realize the Fed may turn off the spigot and end its low interest rate policy? What happens when the Fed stops its bond asset purchases?
That, my friends, is when this bubble bursts.
The Biden team has embarked on a very treacherous path. Fingers crossed we manage to make it through this time without the bubble in the market bubble getting popped.