Confounding and confusing events 6/6/22
This month’s American Legion Magazine discusses Alan Greenblatt’s analysis of inflation which focuses on supply snafus accounting for much of current inflation, while many blame demand caused by too much government spending. This article also points out the fact that massive outlays by the federal government made it possible to stimulate the desired production of goods and services, and quote Mr. Greenblatt as indicating that there is no free lunch, everything having a cost, and inflation is the inevitable cost of recovering from the pandemic recession. Democrats and Republicans, President Biden and President Trump both share the blame associated with government spending, but they also deserve credit for doing it.
The Fed is going to begin quantitative tightening which, obviously, is the opposite of quantitative easing, which means, ultimately, that the money supply will decrease with the intention of assisting and getting control, along with interest rate hikes over inflation. The Fed currently has a $9 trillion asset portfolio which this process will liquidate creating another headwind for stocks. This process is likely to drive up real or inflation adjusted yields which make stocks less attractive, and put-up a pressure on treasury terms.
Canada had a record $5 billion current account surplus. Obviously, this is greatly impacted by oil exports and energy prices generally.
The Wall Street Journal reported that workers share of the economic pie is not growing even though wages are increasing, nor has the dearth of employees ultimately had a significant impact on the share of the economic pie that employees are collecting. This is reflected in the fact that the labor share of national output is roughly where it was before the pandemic, and in statistical terms, in the first quarter of this year wages and benefits made up 62.9%, and those same elements made up 62.7% in the fourth quarter of 2019. Not much of a difference.
The Wall Street Journal also reported, which many are already aware of, is that there is a significant summer worker shortage, which could have dramatic effects on the tourism industry in our region, particularly in places like Lake George, Lake Placid and the surrounding communities. There is no real solution that is being offered, and one can only hope that a number of younger workers will enter the work force and be willing to work at those jobs, although it appears that many of them are being attracted to higher paying jobs than those found in the tourism industry.
The New York Times recently reported that businesses are beginning to open offices in New York City boroughs where their employees live, and not in Manhattan. The impact on the rental market could be significant with dramatically different outcomes in Manhattan versus the other four boroughs. This is going to be something to watch from any number of perspectives, when one thinks about the usage of the subway and busses, driving, the use of vehicles into Manhattan, the impact on eateries in all these locations, decline in some, growth in others, and the same with shopping.
The gun debate rages again. Poland shows some interesting statistics from April of 2021. Background checks supported by 84% of Republicans, 98% of Democrats, and 88% of Independents. Red flag laws garner 92% favor ability from Republicans, 65% from Democrats, and 67% from Independents. The First Amendment’s Freedom of the Press is constrained by libel laws and creating danger, like yelling “fire” in a crowded theatre. Rational constraints on gun ownership are equally important and limited in their intrusion on out rights. Rational common-sense rules need to be adopted.
The biggest issue in recent polling is, of course, inflation, with some concern about the Ukraine. The reaction of the two parties is equally confounding and confusing, in as much as neither is actually proposing a real solution. For Democrats, that is a real problem, because they are in power and they need to show that they have got a plan as opposed to just talking about the fact that they recognize that people are suffering. In fact, they need to take action, and do something that will relieve that burden – reducing gas taxes, raising interest rates and selling off its portfolio, the latter two are a bit esoteric. A couple of simple steps might work: reduce the federal gas tax (states are doing it), reduce FICA taxes or eliminate them for a period of time, which was done back after the 2008 crash, give tax credits to businesses for wage increases versus deductions. Those types of steps will not necessarily cure inflation, but it does provide resources to at least deal with inflation for families. There is little doubt that these will add to the federal deficit and may, in fact, spur more inflation, nonetheless, the public needs to believe that Democrats are prepared to take steps and force Republicans into voting no, as that could become a powerful tool. As it sits right now, my view is that Democrats are going to take heavy losses unless they begin to initiate steps to deal with pocketbook issues. As a moderate Democrat, I find this very frustrating.
The most recent jobs report showed 390,000 jobs created. The unemployment rate remained at 3.6%, wages grew by 5.2%, down about .3%. No real surprises, it appears, but nonetheless, the market fell, go figure.
Apparently, the Republican candidate for Governor in Pennsylvania who won the Republican primary, Doug Mastriano espouses something known as Christian Nationalism which bases its precepts on the idea that God has designed a special role in history for the US, and that the US will receive divine blessings or judgement depending upon its obedience. This is evidenced by opposition to abortion, same sex marriage, and gender rights, as well as, anti-immigrant sentiments, with particularity against Muslims. This is another in a long line of anti-immigrant sentiments wrapped in what might otherwise be a reasonable expression of one’s belief, but when we see Christian Nationalism walking alongside the Replacement Theory, one has to wonder is God really on that side?
Legal and illegal immigration is down, which is having a major impact on California farms. This has been much discussed over the last several years as Mr. Trump clamped down on all forms of immigration which has left many, particularly agricultural businesses, without enough employees. This has been a constant problem for the better part of 60 or 70 years as Americans have not wanted to pick the crops, if you will, leaving farmers desperate for labor. There is clearly a need to allow people into the US who will, in fact, work the fields, work doing other heavy outdoor work, and yet, we resist this idea with the absurd notion that Americans will take those jobs. One would think with well over 11 million jobs unfilled, including some of these, that we would begin to understand the nature of the issue and to rethink our positions, so that we can get these jobs done. We also have to remember that if you increase the cost of AG products, that goes directly to the consumers and feeds inflation (excused the pun). This is another inflationary factor that is not being addressed, and in many cases even vaguely understood.
In a recent article published by Fast Company on work life balance, they addressed what recruiters are looking for in recent hires. It has moved from focusing on degrees and looking to skill sets, such as a learning mindset, the ability and desire to set yourself apart, evidence of self-confidence, a desire to be part of a team and work with others, and the desire to grow in a career, as well as the quality of your decision making. This is all interesting because obviously those are somewhat subjective and difficult to analyze in the interview process. It would seem that you would have to deliver evidence of those skills in letters of recommendation, outcomes in other jobs, etc. I also wonder whether or not, as the market has tightened, people are looking for ways to expand the job pool without solely focusing on what’s your degree.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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