The Jobs Report in Light of what Powell Said: The Fed Cannot Create Supply of Labor, But it Can Slow the Demand for Labor

Higher interest rates, for longer.

By Wolf Richter for WOLF STREET.

The data across the board, supported by countless industry reports, have all told a similar story: There is more demand for labor than there is supply of labor.

The layoffs in the tech and social media bubble are quickly getting absorbed by other companies, including in other industries, while the number of layoffs and discharges across all industries are near historic lows, and applications for unemployment insurance remain near historic lows. Wages have continued to surge; and for job hoppers, wages have exploded as desperate companies are willing to pay to fill slots, amid a gigantic pile of job openings and massive job hopping as workers are arbitraging the tighter labor market for their benefit.

And today, we got more of the same with the jobs report from the Bureau of Labor Statistics. The labor force – people who either have jobs or are actively looking for jobs – is still the key problem: It dipped further and remains far below pre-pandemic trend. This is the supply of labor.

Powell, in his speech two days ago, focused on the labor force. He pointed out that the Fed cannot increase the supply of labor, and the Fed cannot increase the labor force; but the Fed can tamp down on the demand for labor, to bring supply and demand somewhat in line in order to tamp down on the inflationary pressures that occur when companies are passing on their surging labor costs by increasing prices. This is particularly an issue with services where raging inflation has now taken hold. And in many services, labor costs are a huge factor.

And this is now happening everywhere: Companies that provide services are passing on their surging labor costs by jacking up their prices.

The Fed is now trying to tamp down on this demand for labor – in addition to tamping down on the demand for goods, services, and investments – with the fastest rate hikes in four decades  and with the fastest QT ever.

But it’s not working yet. Consumer demand is not landing, and the labor market isn’t landing either. And inflationary pressures persist, particularly in “core services” where labor costs are a huge factor.

The labor force is not recovering back to trend.

The labor force – people who either have jobs or are actively looking for jobs – fell by 186,000 people in November, the third month in a row of declines, to 164.5 million, which is roughly back where it had been before the pandemic, but it remains stunningly far below pre-pandemic trend.

In other words, the labor force, after growing for decades, stopped growing once it bounced back from the pandemic lows.

In his speech two days ago, Powell pointed out that there is a “shortfall” of about 3.5 million people in the labor force, compared to pre-pandemic trends, citing data from the Congressional Budget Office and the BLS. And I’m getting about the same thing, based on BLS data and my own calculations: a “shortfall” between 3.5 million and 4 million:

Where does this shortfall come from?

The labor force participation rate – the labor force as a percent of the working-age population 16 years and older – dipped for the third month in a row to 62.1%. It has gone backwards this year:

The prime-age labor force participation rate – people between 25 and 54 years old, which eliminates the effects of retiring boomers — also dropped for the third month in a row, to 82.4%, but it is close to where it had been before the pandemic (83.1% in January 2020 and 83.0% in February 2020).

This shows that the biggest issue in the labor force is not the “prime working age” segment of the population, but the over-54 segment:

Powell on why the “shortfall” in the labor force.

In his speech, Powell discussed two categories of reasons responsible for most of this “shortfall” of about 3.5 million people in the labor force: excess retirements and slower growth in the working-age population.

“Excess retirements”: 2 million of the 3.5-million shortfall in the labor force. Excess retirements are more retirements than would normally be expected from aging alone. Powell was referring to recent research at his shop.

What might have caused these excess retirements, according to Powell:

  • Health issues: “COVID has posed a particularly large threat” to the elderly.
  • For older workers who’d lost their jobs during the mass layoffs, “the cost of finding a new job may have seemed particularly large, “given pandemic-related disruptions to the work environment and health concerns.”
  • “Gains in the stock market and rising house prices in the first two years of the pandemic contributed to an increase in wealth that likely facilitated early retirement for some people.”

And they’re not coming out of retirement, according to Powell:

“The data so far do not suggest that excess retirements are likely to unwind because of retirees returning to the labor force. Older workers are still retiring at higher rates, and retirees do not appear to be returning to the labor force in sufficient numbers to meaningfully reduce the total number of excess retirees.”

Slower growth of the working-age population: 1.5 million of the 3.5-million shortfall in the labor force. “The combination of a plunge in net immigration and a surge in deaths during the pandemic probably accounts for about 1.5 million missing workers,” he said.

The Fed cannot increase the labor force, but it can reduce demand for labor.

The Fed’s tools “work principally on demand,” Powell said. It’s not up to the Fed to increase the supply of labor, he said. But it can reduce the demand for labor.

And we knew that: Higher interest rates make credit-funded consumption and investments by consumers and businesses more expensive, and they are dialed back, removing some demand for labor. The decline in asset prices increases uncertainty among businesses, and new projects are being dialed back, etc., which further decreases demand for labor.

“For the near term, a moderation of labor demand growth will be required to restore balance to the labor market,” he said. This was very hawkish.

And it became even more hawkish in light of today’s jobs data. So higher interest rates and more QT, because those are the tools the Fed has to tamp down on demand for labor, which would tamp down on surging labor costs that companies are passing on to consumers via higher prices.

But demand for labor didn’t cool: Aggressive hiring pulled people out of self-employment.

The number of people in the labor force that are not working has been near historic lows. In November, it dipped further to 6.0 million unemployed. Over the past five decades there were only three brief periods when the number of unemployed people in the labor force was this low.

What do employers do to fill their open positions? They hire aggressively and offer higher pay to attract workers that already have a job (which creates the current churn) and to attract workers who are self-employed…

The pull from self-employed to regular payrolls shows up in the gap between the growing number of workers on regular payrolls, as reported by employers, and the stagnating number of all workers, including the self-employed, in line with the stagnating labor force, as reported by households.

The number of employees on regular payrolls rose by 263,000 in November from October, and rose by 816,000 over the past three months, and by 1.9 million over the past 6 months, to 153.5 million employees, which is up by 1.044 million from February 2020, according to the survey of employers.

But the total number of workers, including self-employed, fell by 138,000 in November, and fell by 262,000 over the past three months, to 158.5 million, which is still down by 396,000 from February 2020, according to the survey of households.

Both of them — payrolls and total number of workers — are also far below pre-pandemic trends.

The stagnation in the total number of people who are working, as reported by the survey of households, and the growth of regular payrolls, as reported by the survey of establishments, shows that employers’ efforts to fill their open positions by offering higher wages and better benefits is drawing the self-employed into the employment realm, while the overall number of working people hasn’t improved at all this year.

This situation where employers struggle to fill jobs – more demand for labor than supply for labor – is a good thing for workers. It has shifted the power balance, and it continues.

But now there is raging inflation, and this inflation is fueled by a complex combination of factors, including vast amounts of money printing, interest rate repression, and stimulus spending to produce the most wildly over-stimulated economy ever, and this money is still circulating out there, and it’s still creating demand for goods, services, and labor. And the Fed is now trying to tamp down on this demand, including the demand for labor, with, as Powell indicated, even higher interest rates, for even longer.

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  244 comments for “The Jobs Report in Light of what Powell Said: The Fed Cannot Create Supply of Labor, But it Can Slow the Demand for Labor

  1. Poor like you says:

    Seems like the Fed is fighting inertia at this point, and trying not to slam on the brakes.

  2. Augustus Frost says:

    Powell is wrong. No one retires except because they can support themself or someone else does it for them. Otherwise in the real world removed from fantasy, you starve.

    Some of these people may have been able to retire prior to the pandemic but did not.

    Mostly, it’s because of “printing” which inflated asset prices and “free” money bread-and-circus, including giving more “free” money than these people made working.

    • Brian Hill says:

      Hmmmm. I agree that nobody retires who cannot, but the converse is not true. Many people used to keep working because they liked their work. Among my 60’ish crowd, I am anecdotally seeing people quitting because they are not impressed with their workplaces. They have enough to retire, and they could have continued, but the atmosphere is poor, so since they have options, they move on. I will soon (1-3 years) be in that category myself.

      • Holeinthewall says:

        I’m not terribly surprised at the drop in labor force participation rates. Some of the younger labor participation demographics have been trending downward well before covid. I think part of the mindset we might be seeing is with increasing cost of living we are seeing more “I missed the asset runup so why bother trying”. Covid clearly made a mess of the labor force but I don’t think all of these changes are new just more pronounced.

        I’m very curious if the trends mentioned are significant enough to have any implications for the duration of ongoing inflation, especially since service costs are propping up inflation. My intuition says that it will take a very long time before the labor market works itself out.

        • cb says:

          “I think part of the mindset we might be seeing is with increasing cost of living we are seeing more “I missed the asset runup so why bother trying”.

          That’s right. The FED and Financial engineering has distorted the markets and perceived trade off between effort and reward and many have chosen to drop out.

        • Gabe says:

          I agree with the lack of interest in trying to catch up with the runaway asset prices. As a ‘geriatric’ millennial, I have no interest in paying the current prices on significantly overinflated GenX & Boomer real estate and stocks. My starter home purchased 18 years ago will remain my primary residence until prices for the next step up become reasonable. I refuse to pay for the froth…not to mention my generation will be less well off than the one before it. If you think I’m going to wage slave till I’m 70 you’re kidding yourself. Pop the damned bubble already. :)

        • Einhal says:

          Agree with all of you. The problem with money printing is it ultimately makes work worthless. No one wants to work for $ if $ can be conjured into thin air and handed out (indirectly) to people who already have assets.

        • Rob says:

          It isn’t a secret that demographic contraction/collapse is coming?

        • 91B20 1stCav (AUS) says:

          cb – your last paragraph a singularly GREAT insight about what has happened to the ‘Murican Dream’ in the last 50 years…

          may we all find a better day

      • rojogrande says:

        I think you’re correct and will add that there probably used to be more social pressure to work until you reach a “suitable” retirement age. I think many people today have questioned whether the rat race is worth it and may accept a longer albeit more frugal retirement. I don’t think Powell was wrong as a blanket matter. Powell’s reasons for excess retirements are all plausible for people who have the means to support themselves and therefore may decide to retire before they otherwise would have based on age alone.

        • Augustus Frost says:

          It’s the asset mania that let’s so many people retire early fitting your description.

          There is a very low minority who actually had very high paying jobs or owned a profitable business for a long time but that’s not the norm.

          There are also younger people who have what I describe as modest asset bases, including millionaires which is hardly rich now.

          They are exemplified by the Financial Independence Retire Early (FIRE) crowd many of which live outside the US, with or without side gigs.

          I expect most of these people to be forced back into the labor force when the asset mania crashes.

        • rojogrande says:

          Nothing you’ve said counters any of the reasons Powell gave for “excess retirements” right now. The asset mania is what it is, people may decide to retire because they have the resources to do so regardless of how they amassed those resources. Some people who miscalculated that they can live off their investments may be forced to return to work, but how does that make Powell wrong? Powell will probably be happy to see some of those people return to the workforce as the asset mania unwinds.

          Many people can support themselves, and therefore retire. Whether it’s from stock gains, living frugally in order to retire early and avoid exposure to covid, or they were on the verge of retirement and don’t want to look for another job, they’ve decided to retire earlier than expected. It really doesn’t matter why, the fact is that right now there are “excess retirements” relative to the age of the workforce. Disparaging the asset mania that made it possible doesn’t make the early retirements any less real.

        • Augustus Frost says:


          Ignoring the asset mania doesn’t make it go away. Where do you think so many people got the fake wealth to quit working?

        • Einhal says:

          rojogrande, I don’t think you and he are actually saying different things. If I read him correctly, he’s saying that the asset mania means that asset prices are far in excess of the productive capacity of society they are supposedly backed by. That means that once the mania ends and asset prices and production reach some level of equilibrium, then people won’t have enough “wealth” to retire early (or to remain retired).

        • rojogrande says:


          I’m trying to make sense of your comments. Are you saying Powell is wrong because the “excess retirements” don’t actually exist? Or are you saying the reasons Powell gave for the excess retirements are wrong? I accept the fact that “excess retirements” exist right now, and Powell’s reasons why as stated in the article are plausible to me, but maybe you don’t even get to the second question.

          As for your question: “Where do you think so many people got the fake wealth to quit working?” I actually agree there’s an asset mania, but it doesn’t matter. What matters is many people believe they have the wealth to retire earlier than their age would suggest and have chosen to do so. Just because you, me, or anyone else, thinks this wealth is “fake” doesn’t mean these people haven’t retired based on their current wealth.

        • rojogrande says:

          Einhal, you may be right which is why I asked AF what he means when he says “Powell is wrong” in a separate comment.

        • Einhal says:

          Ahh, got it. Augustus is a big boy and can speak for himself, but I think he was referring to: “The Fed cannot increase the labor force, but it can reduce demand for labor.”

          The Fed CAN increase the labor force by popping the asset bubble. If people retired because of asset gains, then those asset gains disappearing will make them “unretire,” increasing the labor force.

          I think his point was that people aren’t going to retire due to “COVID fears” or “workplace politics” unless they can support themselves or someone else will do so for them. Right now, they believe they can support themselves because of their stock/house gains. Take those away, and they’ll recalibrate their beliefs.

        • Petunia says:


          I retired early, not because I had the wealth, but because I needed the money. My early retirement gave us the extra money to close the household budget gap and save a few dollars. What I did as the lower earning spouse has huge implications for the incomes of women going forward. There are so many women doing this, it has become a strategy. I will be penalized forever because I needed the money, as many other women do. Women retiring early is closing the financial hole in many families. How long it will work is the big question.

        • Buderman says:

          Amen to that and it’s not just millennials doing it I’m 52 and I’ve avoided conventional work regimes for quite some time now. One thing that I’ve noticed in studying financial media and the underlying financial economic theories of markets is that it’s based on very short term reductionist thinking that doesn’t accept the interconnected nature of human as well as ecological systems and that we rely on these for continued stability hence the term “sustainable”. And that’s the reason for bubbles! What comes up must go down!

          The way in which the media operates is not expansive and while it may be diverse color or ethnic wise I suggest it’s less able to grasp the complexity of our world with a critical perspective. Hence the kid gloves for SBF. I would suggest the best mitigate the bubble isn’t better data or better Fed leadership it’s better more accurate reporting in the financial corp media and better due diligence by the corporate and financial leadership.

          Specifically there is lack of depth In understanding why so many of us have opted out of the labor force before normal retirement even when it’s a frugal poverty level existence. Why because they’re talking to their fellow power elites about the problem and no one is actually inviting the people who are part of the movement. There’s somehow a reluctance to look at this “problem“ and examine it deeply. Sure it’s not the only cause of a decline in labor force participation , but it may be a major factor. eBay Craigslist Facebook marketplace Uber door dash Airbnb they do not operate in isolation to social trends. As people have opted out of conventional work formulas and regimes they have had more options like the above to make money without doing a normal job working for a boss commuting to work etc.

          As the wages go up to lure people like me back so will in due time the cost of goods and services also go up. Maybe at some point (possibly if we envision the US being taken over by a far right regime) a penalty tax could be used to force able bodied people back into the workforce … otherwise we need more workers from Mexico … or somewhere else like maybe Ukraine because they are European and poor and now dislocated. But the underlying problem is that a changing demographic is reducing the work force and there are no easy choices that more people opt out only exacerbates the problem. A far right American regime might seek to force more Americans back to work to negate the need for importing more workers as was the policy under neoliberalism. Also automation and rethinking corporate operations (downsizing) like what Musk is trying to do with twitter will be ameliorating factors.

        • 91B20 1stCav (AUS) says:

          Buderman – thoughtful, and well-presented.

          may we all find a better day.

      • Memo says:

        You are very much on track here.
        Oublic and private sector 50+ are exiting their employeers. Many first respinders and others that may have stayed in their jobs 10 years ago decided to exit asap. The workplace began to transition to the next gen’s in 2019/2020. No accohntabilty and everything else that pride in a job stood for. AI is on the cusp of replacing tech workers like robotics did manufacturing. The article calls out thise over 54. I see the exit of 54+ all over the puget sound. Many went through the dot com and great financial crisis. They knew another was coming. The pandemic cash and real estate gave folks a larger nest egg to exit and be cozy. They’re not playing retail casino games either.

      • anon says:

        Brian Hill says he is “… anecdotally seeing people quitting because they are not impressed with their workplaces… “

        This matches my experience 100%. Those retiring in their 60’s (our acquaintances) are doing so because they can. But MOSTLY because they feel their workplaces have become toxic.

        Excellent observation Brian!

      • eg says:

        This is me, Brian Hill. I tired of my field, and the Board I was working for as a member of the senior team was increasingly dysfunctional. That and a technicality around my drug plan in retirement (anyone staying past my retirement date would lose the perk) and I was gone.

        That was last year and I’m 60 now and I’m not going back!

      • CreditGB says:

        Brian Hill, I agree. I retired because “it just isn’t worth it any longer” Gladly, I prepared and was 99% out of debt at the time. Since then, many former co workers exited via voluntary retirement. All of them, that is 100% of them, said the same thing. Even a few high earners, all the same, “It just isn’t worth it anymore”. Of late, it is more the “wokeness” that is so defeating to morale.

    • Wolf Richter says:

      I know people who’ve had it and refused to re-join the labor force. They made enough money, and they don’t feel like putting up with the crap.

      I also know some people in tech who got forced out and now cannot get anyone’s attention because of their age. Age discrimination is alive and well, maybe now more than ever. They’re professionals with enough money to not work, and they don’t want to work a Walmart, and so they call themselves “retired” now.

      • Harvey Mushman says:

        Yeah, that’s kind of scary. I was 48 when I got my current job. Now I’m 59, soon to be 60. Every time in my life that I’ve changed jobs I have gotten a pay increase. But if I have to look for another job in the future… it will probably be a new and unpleasant experience.

        • VintageVNvet says:

          Does NOT have to be that way HM:
          Friend changed jobs or rather companies at 59, 62, and then 71 after a couple years ”retired” and WAAAYYY too boring.
          Claims he got inflation adjusted raises each time, but finally was bored with the work and got serious about a couple of ”hobby” projects and retired again at 76…
          Older folks who want to work on should consider very proactively upgrading skills, especially seeking out latest versions of software and new software that make sense.
          OTOH, I ran into a 75 year old ”handyman” couple weeks ago who loves fixing things and has such a good ”word of mouth” reputation his schedule for routine maintenance is full weeks ahead — he’s getting double the dollars of late 2019 these days, so works about half the hours (plus emergencies for regular clients.) Good Guy!

        • Einhal says:

          Vintage, he’s lucky he has his health. I know a few 75 year olds who are the handiest people in the world, but can no longer bend or lift things, so can’t do it anymore.

        • VintageVNvet says:

          Actually for Einhal, et alia:
          Guy told me he had ”cured” cancer and was SO healthy enough to work because of ” Ehret’s Mucusless Diet Healing System”,,, so I looked it up, and found Ehret’s book still or again in print and read it…
          Lots of ”bombast” and more than a little internal contradictions, but some gems, AKA Pearls IMHO, especially for us of the ”pre boomer” generation…
          Also will add that many of the concepts in that 1922 book continue to radiate today to those who have the self discipline…
          OK, Wolf,,, please read that book before you delete this post…
          And, to be sure, I am absolutely NOT advocating Ehret’s hard core diet for anyone, but will try it for the first time as soon as it warms up in FL next spring. LOL because it’s SO warm here in the saintly part of the TPA bay area AGAIN today…

      • Ken C says:

        It’s not only “don’t feel like putting up with the crap.” It probably wasn’t that crappy, or at least, not (objectively) any crappier than it ever was.

        What happened was the pandemic taught a lot of wellish-off people that not working isn’t so bad after all. There is a giant window between “starving” and “do I really need to plough even more money into my 401k so my ungrateful kids can inherit it in addition to the million-dollar house.”

        The interesting thing is raising interest rates doesn’t necessarily help this particular phenomenon.

        • Einhal says:

          It does if it rams down asset prices. That’s what this comes down to. Inflation will NEVER be under control unless asset prices drop. There is no “soft landing” while keeping stocks and houses as nose bleed prices.

        • HowNow says:

          Einhal, I agree that asset prices will have to drop to slow inflation. But earnings declines have to precede asset declines. Earnings make the world go ’round.
          When customers stop spending, earnings decline, layoffs follow, and demand slows. Inventory build-up, services deferred… this is the start of the cycle reversal. Isn’t happening yet but is on its way.

        • rojogrande says:

          Exactly, it’s not a binary of work or starve for many people. Many people have a whole range of options in between to decide how to live the remainder of their lives. When they choose to drop out of the labor force, they’re showing up in the data as “excess retirements.”

      • Ed C says:

        Yep. I laid myself off from and engineering job and called it a retirement 10 years ago at age 62. They wanted me out, to reduce their medical cost liability, and made life miserable with their stacked ranking system that required that 10% of the population be marked as underperformers and denied raises or bonuses. Funny how many oldsters got thrown in that underperformer ‘elbow’ (of the 9 block ranking). I then did the same work for this same company as an outside contractor and fully retired and took SS at age 66. Go back to work for them, even as a contractor? No thanks. The contract gig was great. I just don’t want to work any more and not sure my brain is up to it.

        • Base Camp says:

          A bit different for me. As a state worker, I’m in the
          Florida DROP (Deferred Retirement)
          With DROP, not only can I retire quicker, but I HAVE to retire 5 years after entering. This has cut down on the participants with 40-50 years of service in the state of Florida.

          When a participant exits DROP they are usually at the top pay scale, and the person who replaces them is usually an entry level position, who will make 50%-70% of what the retiring participant was making. This is obviously good for taxpayers, but it’s also great for the economy because it opens up new jobs for those in need.

        • Augustus Frost says:

          It would be much better for taxpayers if many of the state government’s functions are eliminated entirely.

          The arrangement you are describing just accumulates future unsustainable “legacy” costs. That’s what is happening in Illinois and Chicago (among many) and it will happen everywhere else in the future on the current path.

        • Ken says:

          Did basically the same thing when I was approaching 64 nine years ago. After going through a series of engineering supervisors the management settled on a kid about half my age about that time. I was sitting at my desk looking outside at a beautiful summer day when I got a call from a friend who had retired a few months before telling me how great retirement was. Called HR that afternoon and gave them my notice. Came back as a contractor and worked until I was 66, then started SS. No desire to go back to work even though I’ve had a few calls.

      • Augustus Frost says:

        I was laid off in 2011 at age 46. At the time, I couldn’t afford to retire in the US, but I could have elsewhere, though it would have been risky to do it financially.
        This was my back-up plan at the time.

      • Sammy says:

        Wolf, SPOT ON!!!

        I am an actually retired high school teacher. (The kids I could handle, but so many of the admins were just unbelievably out of touch, as if they’d never met any teenagers before in their lives.) Every summer for several years, I tried getting a side hustle, just like MY teachers had done. No luck! Then I figured out that when they’re asking what year you graduated, they’re just trying to figure out your age. Which they legally can’t just come out and ask.

        Screw ’em. If they want to deal with the drama of their work force coming in on no sleep or hung over or from a different direction 5 days a week, so be it

        • HowNow says:

          Hats off for all teachers! I cannot imagine anyone entering the profession at this point in time.

      • Rob says:

        My dad has been in tech his whole career. Ince he graduated from stanford in 82.

        It’s over now. They axed his whole dept and there is no way he will ever get a other job in tech.

      • dishonest says:

        Ah yes.

        Age discrimination, the only form of discrimination that is dismissed with a broad wink.

      • BS (ini) says:

        I am one that can’t find work in the town I live in but could move to Midland Tx and find work or Houston. Been “retired” since 2017 and my age 65 prevents me from getting any response from internet job postings and all of my business associates are retired as well . I could easily work at an hourly job but no interest. I saved early and for now can still not work but who knows about the future. I know of many others that left the workforce at 60 in the energy business due to the collapse in price from 2014 through 2021. Then the pension calcs due to the ZIRP meant they were working for free if they did not retire based on the annuity calcs for retirement . In addition I know of family and friends that don’t have much money but really can’t deal with the physical aspects of work due to their unhealthy lifestyles. Plenty of older folks that physically can’t do the jobs of fast food and retail or skilled labor jobs. One must maintain their health and strength best they can which takes discipline and energy and difficult to implement.

        • bulfinch says:

          Midland/Odessa are tough rooms. Worked many contracts out there. You can apparently do reasonably well in Midland even in an hourly position outside of the oil fields just because of the utter dearth of talent *not* already sucked up by the fields. Kind of a micro version of what we see in the broader labor markets across the US.

      • Nick says:

        Yeah duh! But these professionals are screwed it they are 50-65. They have plenty of money now but it’s gonna go poof in 2-5 years. You can post data all you want. People can argue this that and the other as to why’s. People can brag about how many homes they have, how they don’t have to work at Walmart but the economy as we know it, as WE ALL know it is over. The US is a disaster on every level. Financially, culturally, spiritually, etc. Look at us and our behavior. A bunch of spoiled, MMT privileged brats. US suburban high schoolers drive better cars and have better phones than 90% of the world’s population. Corruption everywhere in this country. All these entitled boomers who have milked the country dry think they can just wall themselves off from the disaster America has become are arrogant. The rest of the world is really starting to hate us, look what ex-pats do to housing markets in other countries. Every major city in the US from Atlanta to Minneapolis to San Fran is a crime ridden dump. The threat of major global war is higher than it’s ever been. These “retirees” that think they are just going to sail off into the sunset are either insanely naive or dangerously psychotic. I’m 43, strong and healthy. I look at these boomers or 55+ers and how they live and shake my head. Sad, there is a massive boulder rolling their way and they don’t see it.

        • billybob says:

          Wow! You’re smugly encased in your definitive knowledge of the negative future. You must do insanely well in the market.

          You’re young and strong now. Let’s check back in 15-20 years to see: a) How you’re doing physically, and b) Whether your predictions had any accuracy whatsoever.

        • HowNow says:

          “The US is a disaster on every level. Financially, culturally, spiritually, etc.” Sounds like you could use some cultural and spiritual resuscitation yourself.

      • eg says:

        Wolf, that is my brother, the former bond trader. Was let go in 2018 and has concluded that he’ll never be hired again. He’s 57.

    • President Skroob says:

      I work for a major US defense contractor. We are seeing a mass retirement wave due to pension rates. Early retirement age folks that would normally be sticking around for several more years are doing the calculations and finding that their pension payouts are likely to be significantly less over the coming years, like 200K+ less. Instead of risking the loss, they are punching out. Some have other jobs lined up, many don’t. The older, ready to retire anyway crowd is long gone. Never seen anything like it. My boss sent me an email yesterday that he’s retiring in 2 weeks before the rates change. I’ll be running the place soon.

      • Mike T. says:

        Same here. Last years IRS minimum present value i-rates determine the pension lump sum calculations for those that have benefit commencement dates in 2023. Retire next year post 1/1/2023 and you’re looking at a 20% haircut on the lump sum.

        • Harvey Mushman says:

          Wow, that’s interesting. Of all the things regarding people retiring now rather than in the future, this is the first time I have heard of this reason.

      • Patrick G Serowka says:

        As a 48 year old guy who recently started a company, paid and still paid for college w young kids I have aa hard time fully empathizeing w 60 year Olds or rich boomers sitting on a few mil complaining they’d rather have kept working but don’t need to.

        Gosh, what a decent hand, there’s many thing one can do to earn meaning in life. Could always volunteer to do same job if u must.

        I must thank you heartily for stepping aside in your largesse and leaving jobs for the rest of us to achieve the same predicament.

      • The Real Tony says:

        Most people map out a tax strategy which usually leads to retiring early so they don’t go broke by paying too much in tax in their elderly years. I had to retire at age 35 to avoid this happening to me.

    • gametv says:

      It is ALL the wealth effect. People sitting on a million in equity in their home think they will cash out and use it for retirement. When the housing market falls apart and prices are down 50%, then things change.

      2% a month (average) decline for 24 months. in the first 6 months, people dont really think it is a big deal. but as it continues, noone wants to buy a home and the general economy gets hit hard and then foreclosures pile up and the whole thing turns nasty.

      we have to resist the idea that government will ever again step in to backstop wealth. let markets adjust and teach people to make smart money decisions, by allowing them to suffer the consequences of bad decisions.

      • cb says:

        @ gametv –

        yes, and the wealth effect is driven by the money creating effect.

        asset holders benefit at the expense of non-asset holders. hence, generational and social discord.

      • Sammy says:

        gametv, kudos to you for pointing out that “our” government is not on OUR side. People might think so, but I think they believe what they see on their TV.

        As far as the situation in housing, I think anyone looking at their house like its an ATM have lost their minds. RE valuations have been jumping up and down like a Jack Russell terrier for years now; why would anyone think they’ve got a firm guarantee next year? Or 2 or 5 years down the road?

      • Einhal says:

        Exactly. Which is why, as I said before, that the only way to get inflation done will be to knock asset prices down significantly. The idea that you can get inflation under control while maintaining 60 P/E stonks is a fantasy.

      • Jdog says:

        I agree with this, the wealth effect is huge, but would add that the moral hazard thing is also influencing many people. They really believe that the FED or the Government has the power and will step in and prevent anything really bad from happening and they really have nothing to fear. By the time they realize this is far from reality it is going to be too late.
        What is really happening is a convergence of circumstances that are going to create a feedback loop that will hit every segment of the economy in a chain reaction that will go on for years. The dominoes are all lined up and the first one has already been tipped.

    • Apple says:

      Watch the academy award winning movie “Nomadland”. It tells the story of people forced into retirement.

      • Harvey Mushman says:

        I read the plot. I might watch it… but kinda sounds like a downer of a movie.

      • Gilbert says:

        As a part time RV person “Nomadland” was from my perspective depressing and somewhat mirrors what is happening to many people. RV parks have people who sold their homes and bought a ‘rig’ to enjoy the freedom of RV living and have found that there are many reasons this is not a workable lifestyle. Many do not have basic mechanical abilities that are required to fix the numerous repairs that most RVs need and end up either not having the repair or hiring a handyman, which is expensive. Medicare A&B do not pay in total most health-related issues as is the case with the supplements. And a huge percentage of the newly retired are unhealthy in that they get zero exercise and do not eat properly. Many end up reentering the labor force at a salary much lower than pre retirement. I could go on but the bottom line is most people are unrealistic when it comes to budgeting and overestimate the joys of RV living.

  3. Shiloh1 says:

    A run on the Blackstone REITs now in progress, redemption limits in effect.

    I haven’t set foot in an office building for 32 months. Sow the wind, reap the whirlwind.

    • Old school says:

      I keep up with Tanger REIT, but not currently a shareholder. I think it is typical of a certain group of companies. A lot of debt, but they refinanced everything during pandemic at 3% for about five years.

      Now in nominal terms with inflation their cash flows and dividend payouts are up around inflation rate. So they have window of about 5 years clear sailing unless consumer stops spending in nominal terms.

      Shadow banking system is where the trouble is I guess with a lot of speculation and leverage. Will be good if high rates can clear out the gambling but leave the real economy in good shape.

  4. John says:

    Thank you for your relentless writings about the markets, and all your help to make sense of things when they don’t. I have gained experience thanks to your smarts Fed Powell said it best, managing risk.

  5. Wolf Richter says:

    “that undermines the strong economy naratve,”

    NOPE. On the contrary. RTGDFA

    There is a whole huge section in the article about why the gap. So read it!!!

    • Jay says:


      If that means what I think it means, that’s harsh.

      • Wolf Richter says:

        It’s way too mild. I should spell it out in ALLCAPS and bold with flames coming out of it.

        I HATE it when people comment on something important in the article without having read the article, and are clueless and just spread BS on my site because of it. It’s like the original sin.

        Violation of commenting guideline #1

        If you cannot make yourself to read the article, fine, no problem, don’t comment on anything that you imagine is in the article. Comment on something else, like how your neighbor lost his job or whatever.
        Commenting guideline #2

  6. Biker Chique 01 says:

    Why the handwringing about retirees not returning to the workforce? Ageism is rampant and there are no provisions to reintegrate older workers into the workforce. The economy seems to be doing just fine without those who retired or were forced into retirement during the pandemic. GDP growing at about 2.9%, Unemployment is holding steady at 3.7%.
    Older workers are not retuning to the workforce simply because they are not welcome back. The FED Chairman should realize that while the FED FOMC loves to hire people his age and older, corporate America, Federal or State, Local Governments are not opening the floodgates to rehire retirees. The FED Chairman needs to find another talking point that is anchored more firmly into reality.

    • Apple says:

      I think this is part of the ploy to raise the Social Security retirement age.

      • Petunia says:

        Part of the reason I took my SS early was because I knew they would screw me out of it eventually anyway. So far, medicare is on track to do just that.

  7. UrsaTaurus says:

    Wolf – It’s noted here both by you and Powell that interest rates are the blunt tool which really only address labor demand.

    I’ve long wondered, isn’t is even more true with the entire inflation situation in general? Sure, high(er) interest rates can quell demand by slowing the economy and making financed purchases more expensive. But don’t they also significantly hurt the supply side at the same time?

    Companies can’t afford to invest in increasing future productive capacity if financed at high rates. And if they’re looking at future with reduced demand, doesn’t that further dis-incentivize cap-ex investment?

    Seems if you want to address an inflation problem, you’d try to reduce demand while increasing supply, not reducing both.

    • John says:

      I think labor is a companies most costs, so layoffs happen.

    • John says:

      Labor is a companies most expense. That’s where the costs get removed first when supply overtakes demand.

    • Wolf Richter says:

      If you overstimulate demand with huge amounts of money printing and interest-rate repression, and by thereby blowing huge asset bubbles, and by massive government deficit spending, well, you get raging inflation as a result, and then you’ve got to UNDO some of those things that you did that caused this raging inflation. You’ve got to UNDO interest rate repression (so rate hikes), and you’ve got to UNDO money printing (so QT), and you’ve got to UNDO massive government deficit spending (not happening). So the Fed is now UNDOING some of the crap it did that got us raging inflation.

      • Depth Charge says:

        “So the Fed is now UNDOING some of the crap it did that got us raging inflation.”

        Jerome Turkey Lurkey Fowl never breathed a word about that at his press conferences, he only cites “supply chain problems” for driving inflation.

        • Wolf Richter says:

          Yeah, that’s always funny. But others are talking about it. Ester George in a long interview in the WSJ (transcript), carefully discussed the issues of QE when there is no crisis, buying MBS, etc. So there is now some navel-gazing going on, but just not a public mea-culpa.

        • Depth Charge says:

          Fortunately there is YOU, Wolf.

        • Cold in the Midwest says:

          Yes. Always some outside factor, never the current policies implemented by the current Fed administration. The lack of self-responsibility is sickening.

          Elizabeth Holmes may have found that out the hard way. Some people believe her sentence may have been shorter if she had acknowledged her own active role in the perpetration of the Theranos fraud. And then acknowledged her regret for what she had done.

          Instead of that, anything and everything was Sunny Balwani’s fault. He was her “outside factor.”

        • Brant Lee says:

          But Depth Charge, You gotta love that the Fed is having to deal with Labor shortages and higher pay caused by their own BS. If labor is the biggest worry, mark one up FINALLY for the working folks.

          As Wolf has reported, a lot of people have paid down their credit cards and other debt. Maybe now there are not so many grubbing out a living as the Fed, banks, and corporations would like now.

      • Desert Dweller says:

        Wolf, The insanity of the Fed, they massively over-printed during the pandemic and created the Everything Bubble. Now they are being forced to undo their own doing. IMHO the goal of the Fed raising rates is specifically to create a recession that will in turn generate the deflationary forces necessary to kill off the inflation.

        • The Real Tony says:

          That only works when everyone is broke. Most of the seniors and retirees will hit a huge windfall of extra money with these higher interest rates.

        • Gilbert says:

          Raising rates is long overdue. Those of us who have savings got screwed big time during the last decade so that gamblers could win. Now that we are in a rising rate environment savings will be rewarded, although not enough to beat inflation. And don’t forget that interest income is taxed!

    • El Katz says:

      UT: Well, maybe they’ll take some of their excess cash and invest it in CAPEX rather than buying back stock at inflated prices.

      • JeffD says:

        Lol! Good luck with that. It will take legislation to prevent CEOs from paying “stealth” bonuses, largely to themselves.

    • HowNow says:

      How do you reduce demand? Squeeze credit. Things will deflate – both prices and employment, then real assets.
      That’s about all there is unless you just want to start a major war. The Fed can only make credit costly and hard to get.
      “UrsaTaurus”, please, make up your mind.

  8. JeffD says:

    Don’t worry. Less workers to support the demands of a larger population is a good thing. Look at Japan. The idea that people are not having enough children to support the work demands of a larger overall population is all bunkum.

  9. Xavier Caveat says:

    We had to destroy the labor demand in order to save it.

    • andy says:

      Good one, Xavier.

      “The Federal Reserve System has been given a dual mandate—pursuing the economic goals of maximum employment and price stability.”

      The central bankers totally destroyed the second mandate. Now the will annihilate the first.

      • Swamp Creature says:

        The Feds new mandate is supporting the WOKE agenda and climate change. They’ve given up on the first two.

  10. RickV says:

    Small edit to show I did read the piece: “In November, it dipped further to 6.0% million unemployed.” should be … 6.0 million unemployed.
    Your final paragraph:
    “But now there is raging inflation, and this inflation is fueled by a complex combination of factors, including vast amounts of money printing, interest rate repression, and stimulus spending to produce the most wildly over-stimulated economy ever, and this money is still circulating out there, and it’s still creating demand for goods, services, and labor. And the Fed is now trying to tamp down on this demand, including the demand for labor, with, as Powell indicated, even higher interest rates for even longer.” Is spot on.
    With total QE since Jan 2009 of approximately 7 Trillion, the Fed is currently reversing 60B Treasuries + 35B MBS a month or 1.35% of the QE increase, and so far have reversed a total of 381 Billion since QT began, or 5.44% of total QT since 2009. There is a long long way to go.

  11. Pea Sea says:

    Well, I guess we’d better get ready for the Fed to reassert control with a surprise 75 bp rate hike in December!

    Just kidding. It’ll still be 50, and markets will still rally, giving those early retirees even less reason to rejoin the labor force.

    • Halibut says:

      50bp has been the solid consensus, but having RTGDFA, I wouldn’t be shocked if they go another 75bp.

      Heck, no one got the memo from the last four.

      • Gabe says:

        Why wouldn’t the Fed take the opportunity to go .75% in December. Clearly the market can handle it at these ridiculous share prices, as can the labor market given the low unemployment rate & strong jobs numbers today. .5% risks an inflation resurgence IMO. Let’s rattle the market and keep people on their toes. ;)

        • dang says:

          I agree with the gist of your argument and most, but not all the details.

          I think the FRB has no choice but to raise the FFR interest rate by 0.75 pct on Dec 14, given Powell’s face plant the other day. A 50 bpt increase is off the table, unless they really are Powell’s foundlings.

        • VintageVNvet says:

          Why would the FRB NOT take advantage of the clear continuing of the massive inflation hurting all the retired and working folks???
          Because the FRB is the puppet of the oligarchy MIGHT,,, just might be one reason…
          As to whom the FRB is working for,,, DO NOT let any of the propaganda confuse the stone cold facts that the FRB is A tool,,, just one of several of the/our current owners keeping WE the PEEDONs ”in our place.”
          That place being last of the line when it comes to equitable distributions of our labor…
          Been that way forever, with exception of in USA after WE PEEDONs gave SO much to protect the assets of oligarchy from Nazi and Japanese during World War 2…

        • 91B20 1stCav (AUS) says:

          VVNV – a sad, historical aspect that the ‘peedons’ eventually reach a point that they’ll soldier no mo’ in defense of an ‘ownership’ society in which they have precious little path to title…

          may we all find a better day.

        • Seba says:

          How is everyone so sure the economy can take more and bigger hikes? I’m genuinely asking, because I would have thought the full effects of these hikes takes some time to work through an entire economy before the full consequence can be seen, no? I thought the FED was planning to slow down hikes I Dec. and pause to evaluate what happens over some period of time.

          I mean there’s the companies who depended on a steady stream of new investments and loans just to operate and those felt the impact already and will probably dissappear soon, but a lot of other companies are not in that situation. Likewise RE market has all but seized up already and prices are pulling back, I remember even in ’08 it took a while for the wheels to come completely off, it wasn’t fast.

        • Wolf Richter says:

          If the economy “can take” all these hikes plus some and not slow down, we’ve got a major effing gigantic problem on our hands. And it could happen. Meaning high inflation and high interest rates for a LONG time. That’s the worst-case scenario.

        • The Real Tony says:

          Because it would coincide with the Christmas buying season. If it was December 27th or 28th then a hike of .75 percent would be very real.

  12. Michael Engel says:

    1) The 3M-4M shortfall in the job market is caused by the high car prices. People cannot buy a car to go to work. Rent & Used cars prices are too high.
    2) Layoffs in the high tech sector have just started. One programmer out of a job is equivalent to 5 -7 workers in the service sector.
    3) High paying jobs layoffs in the in healthcare, personal service, energy, wall street…might be next. Something is wrong in the crooked healthcare and the banking sectors !
    4) High weight stocks at the top might be next.
    5) The Dow most expensive stocks were elevated by speculators. The Dow is only 6% from the top. It’s time to take some profit, to sell to a young sucker, for fun and entertainment only.

    • Gabe says:

      RE: #5 ..I’ve been averaging out of stocks for the past week. Anyone buying at these *All Time Highs* in many Dow stocks is absurd. I’ll pass. Amazingly, Wall St gave Boomers an out TODAY, but few likely took it, given the decades of grooming. Congratulations to those who salvaged their retirements today and cashed out of the casino.

    • andy says:

      Good points, Michael. And something I could understand. Agree with 2 to 5 very much.

    • Seva says:

      Point #1 resonates up here in Canada as well, in the modern job market some mobility is necessary, either within large metros because of commute times or between regions depending on your profession. With rent prices shooting up and RE still high (but pulling back) it’s difficult for people to make the necessary moves. We also have some rent control legislations which seem like a good idea keeping rents down for some people but that means they can not move because their quality of life will be greatly impacted when they let go of their current lower priced rentals.

      Anyway, after a few months I’m starting to understand your posts a little better and they’re pretty interesting.

      • HowNow says:

        Rent control is bad. It creates rackets for both the renters and the landlords. If you can’t afford the rent, get outta town. The landlords will drop rents as vacancies climb. Not rocket science.

      • The Real Tony says:

        Five or six thousand dollars a year in car insurance for new drivers means not a whole lot of new drivers either.

      • MattF says:

        I’m still not understanding anything he says. I think Michael Engel is probably saying something brilliant. I just wish I had the magic decoder ring so I could understand it.

  13. Xavier Caveat says:

    Inflation was around an honest 20% in the early 80’s, banks were willing to give you 16% interest if only you’d entrust your savings with them.

    Inflation is around a dishonest 20% now, with no countervailing mechanism to right the ship, such as the aforementioned CD.

    As inflation rages ever higher, those that didn’t buy at the old prices will be envious of the early adapters to your money being buggered before your very eyes.

  14. Dennis says:

    Same cycle dynamics. Late stage bull…markets won’t be allowed to drop….national security….sheep get sheared….my life savings gone….wall Street smirks….gotcha again 3x in 20 years!

  15. Eric says:

    I suspect demographics are having a bigger impact than is assumed. The labor participation rate % is a fine metric, but it is the actual number of people which matters.

    There’s a substantial population dip in the upper half of the 25-54 population age group referenced, i.e. the Gen Xers, of which I am one. T

    Assuming demographic data can be trusted, and I’m not making some massive calculation error, from 2017 to present the above 60 population increased by about 9 million, while the 20-59 population only increased by 1 million. That implies 8 million less people to draw from holding everything else constant.

    • Apple says:

      If your synopsis is correct, raising interest rates will have little to no affect on employment, so high interest rates are here to stay for the immediate future.

      • Jdog says:

        The purpose of higher interest rates is to induce recession, which in turn affects employment….

        • The Real Tony says:

          It only affects asset prices, people with lots of cash will see a windfall and as more people retire more people will see a windfall of money if interest rates rise.

      • Swamp Creature says:

        Other than the RE Industry, higher interest rates will have little effect on slowing down inflation or the economy. Who cares if you have to pay 8% or 9% for a business loan. Just pass this increased cost on to the consumer.

    • dang says:

      Well, the end of black death plague was an opportunity for man to demonstrate the power of America’s history, the tendency to interpret Democracy as a fair game.

      The normalization of Covid, so far, is a dud. So there is that.

  16. Nate says:

    Scratching my head a bit how the dual mandate means that the fed should be looking to reduce labor demand. Keeping rates high to cool inflation, yeah, but it’s saying the quiet part out-loud (the effects of high rates will reduce employment) seems a bit politically foolish. I guess Powell is looking forward to retirement.

    Of course the government is more in tune with employers because $$$. But you shouldn’t tell the votes that because they are mostly selling their labor at will. Messes with the show we put on every two years.

    • cb says:

      Inflation is a monetary phenomenon. They flooded the dollars in existence.
      They supported the creation of dollars with interest rate suppression.

    • Wolf Richter says:

      Inflation kills the purchasing power of labor, and over the longer term, high inflation rates are bad the economy overall. Bringing inflation down will benefit labor over the longer run.

      • 8_mile_road says:

        // Inflation kills the purchasing power of labor, and over the longer term, high inflation rates are bad for the economy overall. Bringing inflation down will benefit labor over the longer run.//

        I did NOT learn this from my college level economic class. Wolf, you are the first person telling me this.

      • Swamp Creature says:


        Maybe so, but labor doesn’t care about the long run. They want their goodies now. Whoever gets hurt doesn’t concern them.

        I was unfortunate to live in the NYC area in the Mid 70s and watched one labor strike after another cripple the city. They seemed to enjoy the pain they inflicted on the population there. I left and never went back.

      • The Real Tony says:

        In a wage price spiral wages always lags price increases especially when the inflation rate is understated.

    • dang says:

      You pointed out several inconsistencies in the propaganda that the Fed puts out. I can only guess what they’re really going to do. One only has to review their behavior during the so called, GFC, otherwise known as the greatest crime ever committed that was never prosecuted.

      Look at what has happened to labor for the last 45 years. Unskilled labor has been reduced to an hourly cash for labor minimum wage. It was the Fed financing the off shoring of American industry that done it.

      • HowNow says:

        Dang, dang you. You’ve got some of this bass ackwards. The GFC wasn’t the “greatest crime” ever, there were far, far worse ones.
        And the Fed didn’t finance offshoring. You can thank Sam Walton for the rush to overseas production. Walmart buyers blew out American industrial giants buying cheap sh*t from China.

        • HowNow says:

          Then again, you can point the finger at the poor who could only afford the cheap sh*t at Wally World. So, who’s to blame?

  17. Finster says:

    “Powell, in his speech two days ago, focused on the labor force. He pointed out that the Fed cannot increase the supply of labor, and the Fed cannot increase the labor force; but the Fed can tamp down on the demand for labor, to bring supply and demand somewhat in line in order to tamp down on the inflationary pressures that occur when companies are passing on their surging labor costs by increasing prices.”

    Quibble: It can’t do anything about demand either. But it can supply the currency to express that demand.

    Illustration: You need work done on your house. This represents demand for labor. But unless you have money to express it with, it can do nothing to drive up the price of labor. In the long run the Fed can do little to the real economy aside from mess it up by making its medium of exchange unreliable.

    • dang says:

      Well, I have need of carpenters, painters, AC mechanics, roofers, but I hesitate because of my nightmares caused by dealing with them in the past.

      I don’t mind paying family level wages for an honest job, well done.

  18. SWE Josh says:

    I’m still not sure I agree that “the layoffs in the tech and social media bubble are quickly getting absorbed by other companies”. What I am seeing in my network is that people continue struggling even getting a phone interview. I have heard that many companies are giving the severance in 2 parts: they give you something like 60 days where you are still on Payroll basically with a no-show job and then after that you get a lump sum severance. The 60 days may in part to satisfy the California WARN act but the 60 days may also be to delay when the H1B workers need to find a new job (they have 60 days after being laid off to find a new job and there is a debate if the clock starts when they are notified of their layoff or when they are taken off of the payroll system which seems to be a huge loophole). While they are still on payroll they probably can’t apply for unemployment so it will be interesting to see if the numbers start to spike in a few weeks even without more notices of new layoffs.

    • Einhal says:

      Are they unable to get jobs or unable to get jobs at the ridiculous salaries they were getting before? Big difference.

      • Apple says:

        It may take a few months of no pay check to temper salary expectations.

      • SWE Josh says:

        Yeah, that’s the million dollar question. I would want to hold out to try to get as close to my previous ridiculous salary for as long as I could before I settled on something else. This actually raises the second issue that these newly laid off people have: when they apply to smaller companies, the hiring managers probably realize that these people aren’t vested to this job and are just taking it while the economy is bad and will jump ship as soon as it can. A hiring manager doesn’t want to spend the time and effort to get someone up to speed just for them to leave in a year. It will be interesting to see how that plays out.

    • dang says:

      Having spent 45 + years in the mining business depression. I was unemployed for > 25 pct of the time. The worst was a 3 year run which culminated in a stock market decline that erased my winner attitude.

      I decided to employ a ” Forrest Gump” strategy rather than out of the frying pan into the fire strategy that I had followed the previous 30 years that had taken me to the greatest mining camps and just as fast, spit me out when their fortunes changed.

      • dang says:

        Then came the dream job, the only engineer with 30 years of operating experience in an office of desk engineers. It was brutal as are all highly paid jobs with responsibility but no authority.

        • Harvey Mushman says:

          “It was brutal as are all highly paid jobs with responsibility but no authority.”

          Hah! I understand that.

  19. Mendocino Coast says:

    TUESDAY 04 OCTOBER 2022 8:58 AM
    City AM Article UK :
    Surging prices for essential materials have had a significant impact on the construction sector.

    According to the UK’s latest Government’s Building Materials and Component Index, material prices increased 24.1 per cent in the past year.

    The sector had exited the pandemic in a weakened state, with supplies of essential materials such as bricks, timber, and cement already severely disrupted. These costs are now continuing to rise due to the conflict in Ukraine.


    Construction sector shrinks for second month in a row as recession signals brighten

    “The construction sector has been one of the hardest hit by inflation. Prices rises for construction materials have had a huge impact on the ability of a construction company to control costs on a project,” explained Rebecca Dacre, Partner at Mazars.

    “They are now faced with the dilemma of how they recover costs soaring away on a fixed price contract,” she told City A.M.

  20. dds says:

    Interesting how most folks underestimate the impact of 4 million people who are unemployed or semi-employed because of long covid (according to the CDC). It gets mentioned, but then everybody turns their heads away. Cause, covid is over, right?

    • 91B20 1stCav (AUS) says:

      dds – we are well-practiced in turning our heads away from unpleasant situations until we literally trip over them…(and sometimes, not even then…).

      may we all find a better day.

  21. dang says:

    The mirage propagated by the insincere Fed about their commitment to reducing the number of Joe Lunch buckets is actually disinformation.

    What they really mean is reducing the wages of working people.

    Finance, the tail that wags the dog.

    • dang says:

      In my interpretation of what is going on in the labor market, where jobs are relatively available is healthy for our society. Higher wages are also healthy for our society.

      I think, the inflation we are living with is the result of industrial domination by firms that have sufficient market dominance to raise prices and reduce production. The classic, econ 101 text book, profit maximization strategy of a monopolist or an oligarchy.

      The concentration of industry is accompanied by a concentration of finance, making the structure malleable but brittle.

      • dang says:

        I don’t think that higher interest rates hurt Joe Lunch Bucket as much as it hurts the wall street geniuses that are running this shit show.

        • dang says:

          The royal we are at the precipice of an historical change that has never been experienced in human history, except for each morning since the dawn of time.

          The markets seem to me to be whistling past the grave yard, praying that no bogeyman or ghost grabs them.

          The problem with the whole, currently accepted, primitive concept of a “free market” is that it needs exfoliation to include grift.

        • dang says:

          America is not living up to the billing of what a great country it is

          as opposed to what a great country it could be.

          Hopefully, the young people will deign a society that will improve the satisfaction that everyday people deem a great country.

        • HowNow says:

          “Exfoliate”, good term. Haven’t read that in connection to economics. How about transmogrify, as in, make more grotesque?

      • dang says:

        should have read, ” a monopolist or oligopoly.”

        best wishes

      • Happy1 says:

        No. The inflation is related to a massive increase in money supply and a prolonged period of unnecessary low interest rates. This will be solved partly by higher interest rates, but also by QT, which lowers money supply. It would also help if the unnecessary deferral of student loan debt payments is halted as there is clearly no health emergency now.

        • Einhal says:

          At this point, the student loan pause is a vote buying scheme. Nothing more, nothing less.

        • Harvey Mushman says:

          @Einhal, totally agree!

        • HowNow says:

          I disagree. It’s more of a voting liability as it pisses off a lot of those who paid their own way thru college or those who never went and don’t want to pick up the tab. It’s probably more about convictions that by having a large debt load, the economy suffers. BTW, I’m totally against student loan forgiveness but do understand the greater intention.

        • Harvey Mushman says:

          Student Loan Forgiveness teaches people that they do not need to worry about paying off their debts.

  22. George W says:

    Bring back the boom bust towns of old…

    In the past, labor followed demand as there was a reason for labor to be there. Not so much anymore. Now demand is everywhere but not really so.

    What green germ are the residents of Phoenix chasing, the eternal sunburn?

    The work from home thing does skew the facts somewhat but so does working remotely in another Country, like say India.

    Park City is fantastically over priced but what do most of the residents do? Nothing…

    • George W says:

      I got in my car and drove down to the grocery store, it was exausting…

      That is not really work, some would say.

      The argument for many, many residents would be, to me, it is!

    • George W says:

      Butt, butt, lets hear from Mitt..

      Of Course, I sold stock to pay my way through college but doesn’t everyone?

      When I was back in my private equity days, we went to China to buy a factory there. It employed about 20,000 people. And they were almost all young women between the ages of about 18 and 22 or 23. They were saving for potentially becoming married. And they work in these huge factories, they made various uh, small appliances. And uh, as we were walking through this facility, seeing them work, the number of hours they worked per day, the pitance they earned, living in dormitories with uh, with little bathrooms at the end of maybe 10, 10 room, rooms. And the rooms they have 12 girls per room. Three bunk beds on top of each other. You’ve seen, you’ve seen them? (Oh…yeah, yeah!) And, and, and around this factory was a fence, a huge fence with barbed wire and guard towers. And, and, we said gosh! I can’t believe that you, you know, keep these girls in! They said, no, no, no. This is to keep other people from coming in. Because people want so badly to come work in this factory that we have to keep them out.

      • George W says:

        Uhm, wait a minute mitt, you forgot to mention how wonderful you found the whole experience!

      • Petunia says:

        Since when does the son of a governor pay his way through school?

    • 91B20 1stCav (AUS) says:

      George – an article by the late H.S. Thompson entitled (as I imperfectly recall) ‘Boomers’ (relating to your ‘boom bust’ reference above, not the current ‘Baby’ imprimatur) is a good read from his pre-‘gonzo’ era work…

      may we all find a better day.

      • eric says:

        “Ignore that nightmare in the bathroom. Just another ugly refugee from the Love generation, some doom-struck gimp who couldn’t handle the pressure.”

        ― Hunter S. Thompson, Fear & Loathing In Las Vegas

  23. American Dream says:

    It’s truly amazing how these narratives take hold.

    The other BS narrative of the day was around the small tick down in average hours worked, as if that showed labor weakness. Even though it’s in line with pre pandemic numbers.

    What people should have been alarmed about were wages being revised up and then coming in hot. A 30% beat on job adds and participation rate ticking down again to way below pre pandemic levels.

    Asset inflation played a huge role in the labor shortage. Powell even acknowledged it Wednesday when he said the housing bubble and stock gains contributed to more people retiring. Probably the most hawkish thing he said IMO

    • Jdog says:

      The real issue that no one is addressing is that about 12% of all employment in the US is by companies that at this point, are Zombies. They only exist because of low interest rates resulting in cheap borrowed money, and their ability to roll over their debt. As the economy turns down these companies will disappear taking a huge chunk of the nations jobs with them. This alone without the other huge problems the economy faces, is enough to create a crisis. When you add in everything else, you are looking at the perfect storm.

      • Good 👍 point!

      • Jay says:

        I agree there are zombie companies. If you 12% is anywhere close to being true, then ’23 is going to be pivotal.

        The Fed may be forced to take the FFR up to 6% and leave it there into ’24.

        That’s not good news for ANY zombie company.

      • Harvey Mushman says:

        Or maybe the workers that get released from Zombie companies, find jobs with real companies that produce actual products or services of value.

  24. THEWILLMAN says:

    The saddest thing about all this is if they’re successful in cooling down the labor market – the 78 year old on SS that needs to supplement with 20 hours per week at the grocery store will be out of a job way before they get the VP of Engineering who retired 7 years early back into the labor market.

    The most vulnerable will suffer the most.

  25. Bet says:

    I wonder. Wallstreet is whining and squealing like a stick pig. My guess entities are more leveraged than ever. Higher rates increase carrying costs. Wait until
    January after the end of year performance chasing. My guess , market up into the fed. .5 sell the news .75. Toonces

  26. 8_mile_road says:

    // And the Fed is now trying to tamp down on this demand, including the demand for labor, with, as Powell indicated, even higher interest rates, for even longer //

    I will be surprised if the FED decides to hike the interest rate by 50 basis point in December FOMC meeting. There is no way to bring down inflation rapidly unless Powell acts as Paul Volcker — drastically raise the interest rate to 10%, or higher.

    • DawnsEarlyLight says:

      I assume you mean the FFR? The Fed certainly has enough dry powder to it by 50 basis points. To raise FFR to twice the rate of the 3 month treasury would certainly produce interesting results! (Pun intended)

  27. Old school says:

    Yardenni is out with good charts on the different measures of aggregate money and rates of change of the same. Gives a pretty good visual on were we are at with the amount and rate of change of money in the system.

    Looks like we are roughly 1/2 year from getting excess out of the system even with rapid decline in m2 and other similar measurements of money. Fed and Congress kept the money drop going too long and it just can’t be bled off overnight.

    • cb says:

      @ Old School –

      What do you consider excess? The 4.6 Trillion the FED printed over the last three years? Not close to that amount is going away. Inflation is baked in the cake, especially with their 2% target. I would openly laugh at the bastards if they weren’t so damned sickening. They are just playing us, as they have been since inception and will continue to do so until the power structure changes and they are bounced, if ever.

      • Old school says:

        My understanding is it more about money actually out in the economy rather than Fed balance sheet.

        Normally the amount of annual money growth is around 6%. It got as high as 25% on annual basis. Even though rate of change has collapsed to about zero the about of money in the system is still above long term trend and that excess money is still out and about.

        What the heck was Powell thinking when he was saying inflation was transitory and continuing easy money. Only thing I can think of is he saw it as a chance to get fed funds rate way off the zero bound by letting inflation run hot.

        • cb says:

          Who ever knows what a liar thinks?

          Inflation running hot is not needed to get fed funds rate off of zero bound.

          When new money is created, the purchasing power of existing money is compromised.

          I have heard of the normal 6% money growth. Professor Steve Hanke of Columbia has spoken on this many times. I would like to better understand how that ties into growth and inflation.

        • HowNow says:

          OS, that’s a very interesting thought… that the Fed would need more of an emergency to get rates back to a no-longer-in-a-crisis level.
          People credit Volcker with putting down the hammer, but he didn’t do that initially. He tried gradualism but it didn’t work.

    • Spencer says:

      LOL. Yardeni bought gold at the top in 1980.

  28. Kevin W says:

    Yet another casualty of ZIRP: the destruction of the work ethic among 25-54 year olds. Housing costs and even car prices are through the roof, so they’ll move back home with mom & dad. And if they’re living at home, their cost of living is close to zero, so why get a job at all?

    And in case our young people didn’t get THAT message, here’s another: drop out of the workforce, go to a university (the pricier the better), study something worthless, borrow mind-bending sums of money, then call 1-800-Vote-Dem and get your loans forgiven, paid off by the dumb stiffs who do punch a clock and contribute to the productive economy.

    • Einhal says:

      Can you blame young people for having no work ethic? The whole point of work is to support yourself and save for the future? If you can’t support yourself, because asset prices have been driven through the roof, and you can’t save for the future, because rampant inflation means your savings become worthless over time, why bother?

    • HowNow says:

      The work ethic will return when people really need jobs to get by. Jet setters have no work ethic. People laboring in Vietnam will work to their death to provide for their families. Work ethic is as relative to need as the Milky Way is to a black hole.

  29. cb says:

    The last goal the FED has any business or pursuing is to slow the demand for labor. That is evil.

    If through QT or ending interest rate suppression, leads to labor imbalances as side effects, so be it. Let unemployment and welfare address that. But to have as your stated goal to reduce the demand for productive work, in the name of addressing inflation that the drunken FED created …………….. that is evil doing to individuals on a personal, life sustaining level.

    • rojogrande says:

      Are you saying the Fed should pursue QT and end interest rate repression, but lie about the fact that higher unemployment is a likely outcome of those policies? The lying somehow makes it less “evil”?

      • John says:


        How about Wolf is just being kind enough to let us know what’s going on with money. Don’t shoot the messenger. Nothing to argue about here.

      • cb says:

        I am saying the FED shouldn’t grandstand and point the finger at labor as the problem. The problem is the FED. Those idiots flooded the system with money, made dollars worth much less, and set the stage for labor’s cry and bargaining power for more money.

        Inflation is rising faster than labor costs. The FED and Government probably want rising labor costs anyway. Part of their out – stagflation.

        You can bet gov workers will be at the front of that gravy train. Congress will raise their own pay.

        The inflation is because of too much money creation. Most of it won’t be undone. Their stated goal is 3% inflation and that’s probably as understated (lied about) as “transitory.”

        • cb says:

          stated goal 2%

        • Wolf Richter says:

          Your anger causes you to post twisted stuff. The Fed is hiking rates and doing QT to tamp down on inflation. Thereby the Fed is UNDOING some of what it did before. So now it has to look at economic data to see where inflation might be going. It’s looking at various demand and inflation data, including the demand for and costs and prices of goods, services, and labor — because they’re all inter-related. The Fed is targeting PRICE INCREASES of all kinds by targeting DEMAND of all kinds, and it has to look at economic details to see how this is going.

          The Fed cannot pick and choose what specific component of the economy it wants to target. Monetary policy is a “blunt instrument,” as it’s called. In other words, rate hikes and QT hit wherever they hit, including asset prices (and we’ve seen a lot of that already).

          Also, you have recently started to constantly trample on our commenting guidelines, which caused a bunch of your comments to get deleted because I have run out of patience:

          #6: If about 5% of the comments under one article are yours, it’s time to back off…

          #7: If comments by the same commenter keep saying the same thing, they become a “broken record” …

          #10: No name-calling of officials, politicians…

  30. josap says:

    go to a university (the pricier the better), study something worthless, borrow mind-bending sums of money,

    Also sounds like a great retirement plan.

  31. Anthony says:

    One thing about the retired(not sure about the fake retired) is that, on average, they spend much less. They have most things so why buy more…… This may be one reason why there appears to be a drop in demand for things but an increase in demand for services.

  32. Andrzej Barda says:

    Is it possible that all economic indicators are lagging and what are experiencing is a massive bull whip effect from high inflation sending false signals to all participants of the economy? And at the end of bull whip cycle there is a massive hangover?

    • eg says:

      That was certainly the case with the supply chain snafus created by Covid. I’m still expecting a recession in 2023.

  33. John says:

    So money markets in repos at the fed is 3.8%. The fed is saying this is one of their tools. I cannot comprehend this. I have read also this will not always be 3.8%. Cash is not trash for sure now, I just do not understand the feds moves an objectives or what they are planning and how it works.I know it’s about removing the supply of money. Maybe something to write about an enlighten us? Thanks for all your writings and guidance. ( I know it’s something you are worried about an mentioned briefly).

    • Wolf Richter says:

      In theory, it’s not all that complicated. The Fed is trying to slow demand in the economy by making borrowing more expensive. In an economy, where credit plays a huge role, particularly with business credit, higher costs of borrowing, if high enough, may eventually reduce demand.

      The Fed wants to reduce demand to take pressure of prices, so that price increases will slow or end, which would bring down inflation.

      That’s all pretty easy in theory. In practice, the hard part is that it doesn’t really work all that well. Bringing inflation down can be a very tough and complicated job that can take years, and during those years, interest rates will be much higher.

      • eg says:

        Would it help if on the fiscal side taxes were raised? I realize that any such suggestion is anathema, but I’m not convinced that monetary policy uncoordinated from fiscal policy is very effective.

        • Wolf Richter says:

          Yes (but that may never happen). So now the expansionary fiscal policy that the US has followed for many many years runs counter to what the Fed is trying to do. This is not good. The Fed knows this too, but they’re trying to stay in their lane.

    • Pancho says:

      The FED is producing the high demand for cash. QE cash that escapes into the economy will produce price inflation.

      From 2008-2019, the main holders of this dynamite were banks. The FED kept that cash “sterilized” by paying them interest on all that cash. The banks were scared, many had terrible balance sheets with trash mortgages that the rules permitted them to NOT mark-to-market. The paltry cash from the FED slowly helped them backfill their lousy balance sheets.

      Little cash escaped into the economy, going instead mostly into stocks and other assets: “asset inflation.”

      But then, in 2020-2021, the government went and dumped unprecedented amounts of fresh FED-fueled cash directly into consumer bank accounts. And escaped into circulation, it did.

      The FED is trying to soak up as much private cash as it can to 1) reduce inflation and 2) prevent it from taking another leg up. Paying ~4% on reverse repos to the money market funds is one way to accomplish this, it thinks. Maybe it delays some retirements with “safe” investments paying such “good” rates after years of interest rate starvation. Maybe it will help redirect money from stocks into money markets.

      In any case, the FED does not want that private money market cash escaping and going anywhere else…into the economy, into stocks, wherever.

      This is why the FED is a buyer of cash today.

      • Pancho says:

        Many thanks on the repo rates explanation and the fed thinking. I read somewhere 2 trillion in there on 3.8%. what happens next, or what could happen? Wolfs has been spot on last three years.

  34. breamrod says:

    Powell will raise .05 not .75. He doesn’t want to spook the markets. He didn’t get to be worth 150mil. with bear markets. He telegraphs what he will do so .50 it will be!

    • The Real Tony says:

      It coincides with the Christmas buying season so he doesn’t want the stock market to plop December 7th. .50 is a done deal.

  35. Augusto says:

    Locking people down sucked the drive out of them. I find so many people who are just disconnected now from work, society. Many just don’t care, a “so what” attitude. “Quiet quitting” or just plain quitting, is it really such a surprise rwhen you take peoples freedom away and hand it over to petty, incompetent bureaucrats, replacing life with money for doing nothing, having to follow “experts” telling human beings to have no friends, family, schools, sports, work, church, etc….Something got broke here, something really bad happened, and now the world has changed for good.

    • eric says:

      The lockdowners got what they wanted: a lost herd they could corral and control.

      They believe fiscal will never right itself. Which is where the real danger enters.

  36. David Hall says:

    How long can interest rate adjustments hold down the price of a new home as wages spiral upward.

    The Fed funds rate more than doubled between 1970 and 1980. The median price of a home more than doubled during the same period.

    Large scale housing corrections such as happened 2006-2012 are rare. The GFC was the result of people hoarding empty homes and excess construction spending. Mortgages with no credit checks required sped the housing market towards the financial chaos.

    • Old school says:

      Things change. The world changed after the tech bust and we had 20 years of easy money and one housing boom and bust, plus a second boom so why not a second bust?

      When there is a boom you make money if you are levered up and people got sucked in.

      • cb says:

        @ Old school –
        “When there is a boom you make money if you are levered up and people got sucked in.”

        and therein lies the disruption of our FED/Banker system. The reward for financial engineering and the punishment of workers and savers. Gordon Gecko becomes the hero. Ethical, prudent people become the goats.

  37. The Real Tony says:

    People are retiring early because the more money you make the more tax you pay. In Canada they also clawback your old age security and if you make too much you pay surtaxes and supersurtaxes on your income and end up paying 56 percent of your income in income tax.. If you make too much it also negates the old age credit on your income tax. The smart people hid their money offshore and just pay the alternative minimum tax.

  38. Nick Kelly says:

    Re: .5 vs .75 hike in rates

    In any compass course or industrial process correction, the increments of change decrease as the gap between current and desired level of whatever closes. A .5 bump in rates is actually a larger percentage of the remaining gap than the first bump of .75.

    Powell said he might use smaller increments. The last word is plural. So instead of doing two .75 bumps he might do three .5 bumps. This is not a ‘pivot’ or even a course correction. A rally on a .5 announcement would be a selling opportunity.

    • Sporkfed says:

      The longer the Fed takes to raise interest
      rates and reduce it’s balance sheet, the worse off the majority of
      Americans will be. Allowing the inflation mindset to take root without aggressive
      and swift action just puts off the inevitable. I know he doesn’t want to
      break the markets but that is exactly
      what he needs to do. Argentina 2.0 on the

      • HowNow says:

        That kind of “chastising” by the Fed set the Great Depression in motion.

      • Jdog says:

        Changing reality is something than needs to happen gradually or the public will actually notice what is happening and stampede. It is not about what is best for the people, it is about keeping control of the herd.

    • sunny129 says:

      Nick kelly

      It has been selling opportunity in bear rallies since March. Bear has finished the I stage, nearing the peak of II stage(Bear rally) and then the real dips start until no one left to sell. But strong rebounds will not be rare, b/c of hopium and front running.

      The big picture of a secular Bear mkt is lower of the highs and lower of the lows with bear rallies in between.

  39. 91B20 1stCav (AUS) says:

    …was ‘nara’tive perhaps a joking reference to a certain organization?

    SOP, here: (1.) RTGDFA (2.) if that doesn’t track, repeat (1.).

    may we all find a better day.

  40. Chris L says:

    It seems like the most jobs added were in leisure and hospitality. A. Some of that is probably seasonal B. Those are probably the sectors with the most supply right now. The second most jobs added were in Government.

    The trend at the beginning of this was people leaving the hospitality sector to get better (easier) jobs. Are these same people now coming back to these jobs because they were some of the first to be laid off?

    If true, then the supply in hospitality will start going down, and new hire wages will go down with it.

    I am just assuming here, but it feels like the trends are just reversing from the beginning of all this. I still have a feeling that Q1 is not going to look good from a jobs perspective. It’s the low paying jobs that are getting filled, and that supply will diminish soon too.

    • Chris L says:

      Another thing to add is that a lot of these “self employed” people could have been A. Real estate brokers (we know how well that’s going) and B. Stock/crypto traders. Both of those saw a ton of increase during the pandemic. With values and opportunities dropping tremendously, it makes sense for these people to go find payroll jobs.

  41. RedRaider says:


    What the heck is EXCESS retirement lol!

    • Wolf Richter says:


      • Duke says:

        I can explain excess retirement in one word…..

        Pickleball (addiction)

        If you catch the bug it is very attractive to become a full time playe \ retired worker. I know a few who started and play as much as they can every day.

        Costs almost nothing, social, healthy, 1.5 million new players in the past few years.

        Once Elon humanoid workers are in place, we can all retire and just have them build us homes and courts and feed us so we can all focus on our DUPR ranking.

      • Depth Charge says:

        Time to start giving grades to your commenters. “F,” “F,” “D-,” “F,”……

        • Wolf Richter says:

          Nah, I should just delete this stuff.

        • Jdog says:

          Yes, more censorship and cancel-culture is what America needs. There is no room for different opinions in a liberal democracy.

        • Wolf Richter says:


          1. RedRaider’s question — “Ummm… What the heck is EXCESS retirement lol!” — was defined in the article. He should have read the definition in the article instead of posting the question and making a fool of himself.

          2. In terms of your comment:

          2.a. Presenting fabricated BS as facts is a “lie” and not an “opinion.”

          2.b. Some opinions — for example, praising genocide — are so heinous that its author should be banished from commenting forever.

          3. You’re free to start your own blog if you want to spread lies, BS, and heinous opinions. Or you can spread them on Twitter or wherever. But you cannot spread them here.

          4. Every day I’m tempted to shut down the entire comment section for good because way too many people are trying to abuse this platform to spread fabricated BS, lies, and heinous opinions. My job is to block this crap, but it’s a shitty job and a waste of time, I tell you, and there are days when I don’t want to do it anymore, when I don’t want to see this crap anymore, and instead just shut the comments down for good. And some day I might.

      • eric says:

        Some of your best stuff is in response to reader comments.

        We hope you ignore us or cuss us out but don’t cut us out.

    • Jdog says:

      It is simply another lie perpetrated by the FED and its globalist cartel, which is basically the petrol-chemical industry, which now controls every aspect of your life. The oil companies control banking, education, pharmaceuticals and medicine, government, media, and food production.

  42. Michael Engel says:

    1) Modi of India became the G20 president. On his main agenda is the
    climate change and taming China.
    2) China policies boomeranged on them. US already shifted it’s import to Vietnam and other ASEAN nations. We produce more stuff ourselves.
    3) To stop the bleeding China will offer us steep discounts and few other
    4) A pacified China is better than aggressive one. To reduce the global inflation and tension, China offers might be accepted by US gov.
    5) Modi will celebrate with a victory lap.

  43. Wolf Richter says:


    Sheesh. RTGDFA. I explain the systematic difference, and why that difference is crucial, and what important thing that difference tells us — “us” being people who understand this, not the braindead morons on the internet from whom you picked up this BS — and I made a big effing deal out of it.

    Don’t comment on anything in the article if you haven’t read the article. Commenting guideline #1

  44. Interestingly, looked at a few job ads on LinkedIn.
    That site tells you how many applied.
    Most had 50 to 100 applicants.
    Perhaps not a representative sample.
    Perhaps an interesting data point.

    • tom20 says:

      When my wife had her business, she would also get a lot of “applicants”.
      Our state still required to show proof of job seeking to collect benefits.

      Most would not bother showing up for interview.
      We always made sure to follow up with state that they
      refused interview.

  45. Bobber says:

    I’m astonished the Fed is now just figuring out the correlation between asset price gains and early retirements. This was a predictable result of Fed asset price support.

    The topic of the day should be central bank competency.

  46. Nick Kelly says:

    Two bits of inflation trivia: GF manages cosmetics etc. dept in outlet of large chain. Lately a lot of extra work repricing stuff higher which she says store has already paid for. So it’s not passing on producer prices, just adding to mark up.

    2. Buddy had to get electric hot water tank replaced. Before job, he asked what I thought it would cost. I’ve done 3 or 4 over years myself but tried to add an appropriate inflation bump. I figured 3 to 4 hundred for tank and 3 for install. He told me it was easily accessible. Total turned out to be 1500. He went and checked tank price: 575.
    The installer delivered tank from HD 15 minutes away and had nifty pump to suck out old tank fast. He was there less than 2 hrs. so allowing for taxes etc. he charged a min of 300 per hr.

    • Nick Kelly says:

      PS: all costs are C $ not US .

    • tom10 says:

      Was he a HD employee? If sub contracted, HD may be requiring a set price
      for removal & install.
      One job may be a simple, next is a cluster …..

  47. Michael Engel says:

    1) Inflation is raging in Europe. UK left the union, but the 20% VAT and other high taxes stayed. Oil prices are only a small portion at the pump. UK deep underwater oil resources are old, from 40 years ago.
    2) In Sept GBP/USD and EUR/USD plunged to nadir. UK laborer became
    slave laborers, but those in eastern Europe are worse off. The poor and the middle class in UK revolted.
    3) Sunak, a Stanford grad, might benefit from UK cheap labor. UK might compete with Turkey.
    4) EUR/USD is up since Sept nadir, but despite all the efforts it reached
    only Apr 28/29 congestion area, a lower high. EUR/USD might test July 14/20 trading range, causing more pain…

  48. Michael Engel says:

    In Dec all seaborne shipments of oil from Russia to Europe will stop.
    By early Feb EU NG capacity might fall below 20%.

  49. Ed7 says:

    Labor gets a smaller share of the pie than it used to get. A big fall has happened since 2000. See the first graph, marked “Exhibit 1”:

    Labor really is a market. Price matters (as the article noted). Share of value added matters too, because individuals can go on strike with or without a union.

    • Ed7 says:

      And what happened around 2000? Y2K. That opened eyes in executive suites. The tools existed to use remote workers in India and elsewhere! And those workers were cheaper.

      The lives a many U.S. workers changed dramatically after that date. Whole categories went overseas, duplicating the giant sucking sound that had been already occurring in the manufacturing sector as companies in search of profits exported jobs.

      (And expertise. Americans were widely expected to train their new overseas assistants, colleagues, and replacements.)

  50. random guy 62 says:

    Lots of talk about age discrimination here. Just wanted to make one point in defense of employers like myself. The system is set up in such a way that we are discouraged from having older employees. The cost-benefit tradeoff is often terrible.

    The elephant in the room is healthcare cost. Statistically, the older you are, the higher healthcare expense you carry.

    Our healthcare broker suggests (without ever saying it in writing) forcing out employees with high healthcare costs as the most effective means of minimizing our outrageous expense.

    It is technically illegal for us to incentivize those over 65 to go onto Medicare. Just keep in mind if your employer seeks to inform you of “your Medicare options”, they are bringing it up for a reason. Opting to stay on the company plan instead of using Medicare might just move you up on the list for the next round of layoffs.

    If we had proper healthcare reform in the USA, older workers would find it a easier to keep their jobs longer.

  51. Grant says:

    I’m late to this article, but I’m curious as to why “immigration” rated so small of a mention with regards to supply/demand in the labor pool. It’s not my intention to disparage anybody racially with my following comments, merely to present dispassionate analysis.

    I work in a field of management consulting that is heavy on the IT side. I’m a mid-millennial. I’ve watched as more and more of the workforce is comprised of H1B visa holders, very recent immigrants, or is outsourced completely. This has been a steadily increasing trend. I recall 10 years ago reading that there was a supposed demand for STEM workers in the US that the native population couldn’t meet and therefore we needed to increase the levels of H1B workers we brought in. This struck me as idiotic given that the stats at the time held that around 50% of STEM graduates were not working in STEM fields. One can only infer that companies were not interested in paying the premiums associated with a recent American STEM graduate ($65-85K at the time in most metro areas).

    I see no reason to believe that a significant portion of the caterwauling about the decrease in labor availability is anything other than the above noted trend continuing. I was searching for a job recently and it took six months to finally get a job offer. Not an offer that I was willing to accept (thankfully, it was within my range), an offer full-stop. This isn’t typical of a demand-saturated hiring market. Many of my peers with similar levels of work experience and previous-employer-prestige had the same problem.

    Moreover, I’ve noted a concerted downward trend in the quality of work done in my field the more it has been saturated with H1Bs and outsourcing. Communication curves are about as flat as Kilimanjaro and every single decision point requires a meeting in addition to the various status-check meetings every day which easily run for an hour. A lot of comments discussed the employer limitations regarding risk for hiring older employees, but I believe there’s also an anti-nativist bias at play as well. The problem is that failure, if recognized at all, is not followed up by failure analysis. Why do projects take so much longer to complete? Why do they tie up so many more resources (even if it’s outsourced for pennies on the dollar)? Why is so much more quality-control and rework required? Why is the administrative burden (basically necessitating micro-management) so much higher? Why are so many more meetings and emails required to accomplish anything?

    My observations of these things is largely anecdotal and based on my personal notes and supported by peers (usually after a few beers, as immigration and outsourcing has somehow become a political issue and a politically incorrect one at that). Nobody has accurately gauged the “cost” component in the CBA of largely replacing the native workforce.

    I can’t help but wonder if all of this discussion about labor demand isn’t largely another push for loosening of visa restrictions. Has anybody done any quantitative analysis on labor participation from younger qualified graduates? Are they, as I suspect, living with their parents and working retail or work-from-home customer support or other dead-end jobs?

    I’ll close by noting the only real labor shortage I’ve seen is in fast food, where a lot of restaurants periodically close their dining rooms for “COVID” on random days. The “now hiring” signs tell a different story.

Comments are closed.