Powell’s Inflation Nightmare: Job Seekers, incl. the Employed, Suddenly Expect Massively Higher Wages in Job Offers

And the offered wages that job seekers actually received also spiked massively as employers comply with a new reality.

By Wolf Richter for WOLF STREET.

Wages of job offers received by job seekers, and expectations for wages by job seekers surged in July, in another sign that this inflation is making its imprint on the labor market, and it’s not backing off at all, on the contrary, and then the fretting starts that much higher wages will lead to still much higher inflation.

The wages that job seekers – not just the unemployed, but also the employed looking for another job – expect to get in their job offers spiked by $7,105, or by 11.8%, from a year ago to $67,400 on average, according to the New York Fed’s Survey of Consumer Expectations (SCE) this morning. This portion of the SCE is conducted three times a year, in July, November, and March.

It was the biggest spike in job-offer wage expectations in the data of the SCE, which goes back to 2014.  Clearly, job seekers feel encouraged – and it’s pedal to the metal for their wage expectations:

Employers, still struggling to find qualified employees, seem to play along in order to hire people. The average full-time wage of job offers that job seekers actually received spiked by $8,711 year over year, or by 14%, to a record $69,500 in July, according to the SCE.

The lowest wages that job seekers would be willing to accept to take a new job – the average reservation wage – jumped by 7.9% year-over-year, to $78,600.

These are massive increases in what job seekers expect, and what they were offered. And it comes amid the still unfolding scenario of unions pushing for much higher wages, and not shying away from labor action to underscore their demands. Minimum wages in states, counties, and cities that have them have also been raised, in some cases substantially.

So in July, actual average hourly earnings by “production and non-supervisory employees” – the bulk of total employment – accelerated sharply, rising by 0.45% from June, the biggest month-to-month increase since November, amounting to a 5.5% increase annualized. This is based on surveys of employers by the Bureau of Labor Statistics that we discussed earlier in August.

Inflation has a variety of factors that push it forward – including those related to mass psychology, what I call the inflationary mindset by businesses and consumers that keeps propagating price increases. How these factors all interplay is still badly understood, amazingly, and because they’re badly understood, we get these constant “surprises” dished up by inflation.

One aspect of these inflation drivers is a surge in wages without matching productivity increases. This makes inflation watchers nervous – they’re fretting about another “wage-price spiral.” In the past, wage-price spirals have turned out to be painful and difficult to get under control.

Powell, in his press conferences, keeps pointing at wage growth as a factor in services inflation, which is raging at 6.2%, as service providers pass on higher labor costs.

The other aspect of wages and inflation is more general: People who make more money can pay higher rents, which landlords figured out long ago. And then landlords can pay more for services they need. And workers with higher wages can pay more for other products and services. And when the inflationary mindset kicks in, they tolerate paying more because they figure they’re going to make more too, or they already got a big increase, and now it’s all just part of the flow. And so now suddenly, we’re seeing these massively higher offer-wage expectations.

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  222 comments for “Powell’s Inflation Nightmare: Job Seekers, incl. the Employed, Suddenly Expect Massively Higher Wages in Job Offers

  1. rodolfo says:

    Unions now with a lot more power it seems.
    Inflation marches on.

    • Letro says:

      Unions are a very good tool in the work place. Why because everyone knows the rules. I enjoyed 35 years at electric company with IBEW employees. Exempt employees benefited from union without membership. I was in the department with highest pay grades of all companies. So the exempt staff had the highest pay grades in company.

    • Apple says:

      Hardly. Only about 10% of Americans have union job.

      • Patrick says:

        From the January 19, 2023 US Department of Labor News Release:

        The union membership rate of public-sector workers (33.1 percent) continued to be more than five
        times higher than the rate of private-sector workers (6.0 percent).

        Many public sector union workers are better positioned for significant raises than private sector workers. Especially in California where the State Assembly and State Senate have a Democratic super majority. Governor Newsom is also a strong union proponent. Truly “Good union jobs”, as President Biden would say.

        • JD says:

          Public unions should be illegal. Politicians and union bosses are like wolves and the taxpayer is regularly butchered with very little say in the matter.

        • Ting Ting says:

          I’m a public sector union member in a very high COL east coast ‘blue state’. Our contract was last negotiated just prior to the pandemic and we haven’t had COL increases or raises since. The contract is now up and negotiations have begun.

          The members are largely asking for significant wage/salary increases but the state has already blown up the budget by assuming federal pandemic stimulus would continue. I suspect union leadership will rubberstamp whatever the state proposes – probably some crap that nobody wants like expanded/flexible WFH, or additional vacation days that nobody has time to actually use.

          While defined benefits are excellent, pay, even in some of the more technical positions, is subpar. Many can’t afford to live in the state that employs them and often have multiple hour commutes from adjacent states with cheaper COL. If there aren’t salary adjustments, I think we’ll start seeing some localized disruption.

        • John H. says:

          Ting Ting-

          Any idea what the funding level of your pension plan is?

          If, as you say, you are in a blown-up-budget state, I’m guessing that some day your defined-benefit pension might prove NOT to be as excellent as it now appears…

          Defined benefit plans are a mine field and many will require significant tax-payer support some day, and benefit promises will be adjusted for some.

          Social unrest often accompanies broken government promises.

          Hope I’m wrong for your sake… and mine.

        • doctor_whooves says:

          Patrick. I would impore you to look at the union contracts that California state workers have been getting under Newsom. Every single one over the last 3 years is less than inflation. He may be a ‘strong union proponent’ but when it comes to his own house, he pays them as little as possible. Assembly members even wrote to his office to pay seiu1000 employees better in their next contract and it is still below inflation. Even denying them juneteenth as a paid holiday while requiring the private sector to shut down for the day. Peak hypocrisy.

      • Cas127 says:

        “10% have union jobs…”

        And a *lot* of union membership is taxpayer/inflation fed (ie, government workers). Who are negotiating against easily suborned politicians, notorious for selling out the mass of their constituents.

    • Burt Reynolds Wrap says:

      It’s an easy claim to make but I can tell you from personal experience that not all unions actually represent their workers. Some are in the pockets of the companies and contractors, not the laborers. There has been a minimum of a two year gap in the cost of living going up compared to when wages actually go up slightly, which still results in a net loss for workers, relatively. This is how companies are making so much money, the time lag between increasing prices and when they have to actually increase the wages of their own work force. And just as the other commenter said, Unions in the US are nothing like they used to be and are actually pretty week as well as having been severely diminished and representing only a small fraction of the total workforce.

    • Kenneth M Luskin says:

      This dramatic rise in labor costs has not been seen since the 1970s. This info should be a powerful signal to all those stock market pumpers who think that companies can keep on growing their earnings, and pushing stock prices higher.
      The cost of labor is the only significant business cost that is not part of producer prices, because people are not products… but people are a very significant cost to doing business.
      Over the last few decades up till this year, the owners of companies (think shareholders) have taken an increasingly larger share of gross profits, while labor has taken an increasingly smaller share… which is why margins were at all time highs.
      But, it appears that paradigm is over, because most businesses will not be able to pass on all of the increased cost of labor… = margins will decline even as businesses try to increase their prices, feeding inflation.
      As the people doing the actual work get paid better that will create a more balanced and healthy society… which will offset the damage from higher prices.
      The U.S. economy is 70% service based, so the cost of labor is much more important and twice as large as an input cost than the cost of goods.
      = Why the title of this article: “Powell’s inflation nightmare” is an apt description of this situation, even though labor is not a measured actual component in any inflation index.

      The following is from the San Francisco Fed, dated May 30, 2023, and is another example why I have long believed that the Federal Reserve Board is the most dangerous and powerful/dishonest/corrupt organizations in the world:
      >>>”Numerous studies have shown that labor costs have little impact on services inflation or inflation overall. ” ” Labor-cost growth has no meaningful effect on goods or housing services inflation. Overall, labor-cost growth is responsible for only about 0.1 percentage point of recent core PCE inflation.<<<
      The surge in labor costs is a classic example of exactly what happens at the very end of an economic cycle/stock market peak, as profits and asset prices start to decline, even though key input costs (including the cost of money as measured by both short and long term interest rates) continue to rise.
      Bottom line:
      I expect that the stock market will experience an epic crash within the next few months…. =the shills at the Fed and on Wall st. are a danger to your financial health.

      • Wolf Richter says:

        1. Generally speaking, I take the research papers by economists putting in their stints at the San Francisco Fed with a grain of salt. I’m on their mailing list, and I see them all. They produce all kinds of theoretical stuff.

        2. That said… The article you cited said that wage increases DO fuel inflation, in two ways: 1, and primarily, but which wasn’t the topic of the article, on the consumption side (people who make more, consume more); and 2, and to a much smaller extent, on the cost side in services where services providers pass on higher labor costs (Powell’s theory). And this #2 was the topic of the article. They focused on rent factors in PCE, and they’re correct in terms of rents, because for landlords, the costs of salaries are not a huge factor; the biggest costs are the direct costs of the building (interest, depreciation, taxes, insurance), with maintenance (the wages part) being a smaller portion of the costs.

        Landlords raise rents because/if they can, not because their costs have gone up. Rents are demand driven, not cost driven. That’s where wages come in: people who make more can pay higher rents. Landlords can lose lots of money if demand isn’t there to support the rents they need to cover their costs, and we’re now seeing that as mortgage rates spiked and landlords are having to roll over their 3% CRE mortgages. And the San Francisco Fed made that point.

        • Kenneth M Luskin says:

          >>>Rents are demand driven, not cost driven. That’s where wages come in: people who make more can pay higher rents<<<

          1) Shelter prices, as measured by real rents, and estimates from owner surveys, is about 40% of the CPI.
          2) With wages rising & low unemployment, combined with not enough housing for a growing population…
          = upward trajectory in rent in most areas (Bay Area is an exception)
          = Sticky rising core inflation

        • John knox says:

          The late 1970s inflation was partially driven by unions as they had inflation clauses in their contracts. It was very difficult for Volker to constrain. What cohorts does the representation wage represent?

    • Pilch says:

      Higher wages are good inflation. All things in moderation of course but regular real ppl w discretionary income means more economic activity on Main Street.

      It’s how America comes back to greatness. Savings rates, too, are healthy and fortify our country’s finances.

      Wall Street hoarding profits to waste on $80MM art while we all binge on cheap debt to supplement our poor wages was never healthy.

      Shoes left to drop wrt that cheap debt as it refinances tho but I’m holding my breath.

    • georgist says:

      America in a sentence.
      You guys can’t wait to hit the little guy the second capital blows the dog whistle, no matter how innumerate the reasoning.
      You’ll always fall alone if you don’t stand together.

    • BENW says:

      UAW is asking for, I believe, a 46% raise over three years, among many other concessions. This is on top of ALPA securing massive pay increases for commercial pilots. Didn’t UPS sign a big contract?

      The cost of cars & flying will continue their uninterrupted, large, YoY gains. No stop in sight.

      Bullard was probably right. A 7% FFR will be needed to induce the needed recession. To bad he’s retiring. There’s no 2% core PCE inflation without a recession. It’s just not going to happen, so let’s stop yammering about soft landings.

      Get to it, JPowell, and start hiking again in September. I’d love to see rumblings in the coming days for a 50 basis point move. That would be awesome!

    • Dale says:

      That’s what the recession is for. To fix the “work less, get paid more” attitude every few years.

    • Alba says:

      It’s about time the American worker got a little leverage in the workplace. However, the vast majority of American workers have no union — it’s every man and woman for themselves.

    • Mitry says:

      Maybe I’m off the mark here, but it seems like corporations squeezed the consumer during COVID, and now the consumers (who happen to be employed) are squeezing back by demanding higher wages. I’m not surprised there isn’t a productivity increase among workers. There wasn’t a quality increase in the consumer goods I purchased in the last 3 years either. What if this stalemate between businesses and consumers results in the impoverishment of both. Fewer jobs and fewer workers?

  2. Nemo300BLK says:

    The American Airlines pilots did ok today with their new contract.

    • Z33 says:

      Yes, they got a very high raise as have other airlines (40% raise over duration of contract with 20% immediately). I think AA senior captains now will have $590k base salary not including benefits and my friend who is a retired SWA pilot tells me usually pilots fly 1k hours a year so nearly $600/hr in pay…add in OT/extra shifts and it is much higher. They are not anymore productive than 10 years ago (likely aircraft just as old, too) similar to how a barber isn’t more productive than 10 years ago, but pay still goes up and I fully expect prices to keep going up. I will probably be switching jobs myself soon for a pay raise to keep up with inflation (got the offer last week).

      • Apple says:

        FAA requirements limit pilots to 100 hours per 28 days & 1,000 hours in a 365 calendar period.

      • Vasculardoc says:

        We damn. American healthcare providers get the shaft in inflation. All I’ve gotten is Medicare cuts the past few years. Despite being busier and doing more work (clinic visits and procedures) I’ve seen our profit margin of our practice drop from 25% in 2017 to 3%.

        Supplies cost more, employee salaries cost more, and government/insurance pays us less. Probably gonna have to walk away soon and just work for the hospital for way way less than an AA pilot makes

        • Z33 says:

          Me, too, as I’m in healthcare as well. Medicare cuts keep coming and our patient population is very much Medicare and Medicaid with not many private insured patients to subsidize costs. That’s part of the reason I’m looking elsewhere for employment as it’s not sustainable. Wish we had work hour caps and pay raises rather than pay caps (actually cuts) and no cap on work hours. 1k hours a year would be nice…not even at $590+ an hour like senior AA captains…even a small fraction of that rate with those hours would be nice.

        • Carlos says:

          If you don’t work at a loss, how are Americans supposed to get their free healthcare?


        • Sufferinsucatash says:

          Yes healthcare pay blows.

          But hey the system near me can afford a $200 million 35 bed hospital. Yet they can’t give raises to humans…

          They are actually replacing MDs with PAs too. hope there’s no lawsuits from the lack of understanding on the PAs part.

        • El Katz says:

          Pilots are only paid from when the cabin door shuts until the cabin door opens at the destination. All the other time sitting around airports, doing pre-flight checks, etc., is all off the clock.

        • Rom says:

          Our volumes are up 15% since 2020, reimbursements down 10% (small private physician group).

          Hospital building newer and bigger as we speak. Admin salaries out of control. Private insurers mirror medicare cuts and claim they can’t afford to raise reimbursement for physicians meanwhile recording record profits and maintaining payments to hospitals. In the news all you hear is greedy doctors etc. Within ten years will be lucky to see an MD. The flood of noctors will replace us all. God save our older selves.

        • Cas127 says:

          All the med personnel here complaining about their “low pay”, please explain (in reasonable detail) where the 20%+ of frigging GDP spent on the medical industrial complex actually goes…if not to you.

          And no hand-waving about “ebil insurance companies”…provide some numbers and links to actual data.

          Because the BLS wage stats I’ve seen place medical personnel among the higher/highest paid professions.

          700k Drs. are making $200k+a year median and an incredible 3 to 4 million nurses (out of approx 150 million employed total) are making 70k median (70k is also about the US *household* median income…from *2* working adults).

          So “underpaid” isn’t the first word that comes to mind.

        • Happy1 says:


          Physician pay accounts for about 20% of total healthcare expenses in the US, hospitals 31% and prescription drugs 9%. Everything else accounts for the remainder (nursing, dentists, podiatry, in home care, chiropractic, medical transport, etc).

          So you could cut physician pay in half and barely affect Healthcare costs, which are increasing at 5%+ every year.

          Physicians are paid relatively well, but in inflation adjusted terms on a per case basis, reimbursement for physician work has plummeted for almost all work since the 1990s. In my subspecialty practice, our pay per procedure is essentially unchanged since the 90s, so adjusted for inflation, it has been cut by about 2/3.

          At the same time, the cost of graduate medical education has increased between 3 and 5 fold, depending on state or private institution. My state medical school tuition has increased 6 fold from when I attended. I graduated with 42K debt, my oldest daughter, 320K (yes I did try to persuade her toward other fields).

          And the value of the academic cognitive skill and discipline required to become a physician translates very well toward other disciplines in finance, science, IT, management, and engineering, where wages have increased significantly during the same time in most cases more than doubled during that time.

          What is happening in practical terms?

          More than 50% of Stanford undergraduates in the 1990s were pre med. Now this number is 10%, and more than 50% of Stanford undergraduates are computer science majors. And a significant number of those students will use their medical degree as a springboard to health related positions in industry rather than patient care, as there are so many biotechnology and IT positions in the Bay area. The best and brightest are moving away from the practice of medicine, and non MD providers are rapidly replacing MD care with substandard care.

          Those are the facts on the ground in healthcare. In 20 more years physician work in the US will be much more akin to the UK, paying well less than other career paths with similar degree of difficulty.

        • Cas127 says:


          I appreciate your use of actual data points.

          But (very quickly), there are a couple of major additional observations.

          1) You distinguish between physician and hospital revenues but many physicians have deep financial relationships with hospitals (in other words, a cut of the loot, directly or indirectly). Hospitals have enormous revenue streams and a not small amount of that money finds its way into some (not all) Drs.’ pockets – so treating Drs. and hospitals as utterly distinct entities is misleading. There are regulations to try and stop the worst self-dealing abuses but there are many legal ways that “hospital” revenues end up in Drs.’ hands. Ditto drug money.

          2) If you think that very many occupations have seen doubled incomes over the last 20 years (especially pre-Covid spending bubble) the BLS data contradicts you. 2000-10 was rotten both in employment growth and income growth terms…2010-20 was an improvement but the whole 2000-2020 20 year period was one of the worst America has seen in a long time.

      • Pieloto says:

        While I’m not going to say it isn’t a good time to be an airline pilot, one has to put the ~40%+ raise into perspective.

        AAL pilots last got a raise (+3%) Jan 1st 2019.

        This new contract has its last raise (again +3%) in May 2027.

        I’m pretty sure the rates will exceed inflation from 2019-2027 but there were also productivity concessions.

        It used to be $200/hr meant $200k/yr.

        Now it’s more common that $200/hr means $220k/yr (while working more for it).

      • NBay says:

        Anytime you are ready for robotic pilots, robotic docs, etc, etc, just write the corp management….they will be overjoyed…..if there are enough who want to save a few bucks, then, enjoy whatever stupid thing it likely is you do with your extra “AI” bucks…..or buy a bond and help the gov’t and not the corps, like I’d do if I had the money. And downsize, again like I do, although I’m kinda extreme….experimental, even.

        Separately, I notice all sorts of wealthy older celebrities trying to eek out some more millions in commercials, etc. Is it Wolf’s inflation article driving that or is there something else I don’t know?

        I still say one of the greatest keys to our future lies in (1) the inequality article of Wolf’s I have posted twice very recently (and don’t want to overdo it if it it is not worth considering by anyone but me at the present situation), and (2) climate change….hopefully not reaching a tipping point.

        I admit gross inequality and man made climate change are my major biases…….(3) and I wish I could write as well as unamused…..or even 1/2 as well.

        • 91B20 1stCav (AUS) says:

          NBay – your keys, as usual, are grouped firmly in the black. The difficult reality is getting some genuine general acknowledgement that the spacecraft’s crew maintenance&support systems are, and have been, in trouble for some time…best.

          “…and it ain’t too hard to get along with somebody else’s troubles, ‘n they don’t make you lose any sleep at night…”. – Steve Goodman (RIP): ‘Somebody Else’s Troubles’.

          may we all find a better day.

        • NBay says:

          Damn. He wrote The City of New Orleans (love Guthrie’s version, I figured he wrote it) and I NEVER EVEN heard of him! (Just googled and read about him)
          Thanks, bro, made my day!
          Music is not one of my strong suits except the Robert Johnson inspired stuff, and everything from Jr Hi-HS, of course. Was the Indians who turned me on to LOTS of stuff other than top 40 payola driven crapp, and also KDIA Lucky 13 outta Oakland.

        • NBay says:

          Love Motown, too, but to be honest, can’t recall last time I listened to ANY music. Would rather read.

  3. Debt-Free-Bubba says:

    Howdy Folks. Higher for Longer, the Disco Music era is coming back. We could see double digit interest rates……..

    • Letro says:

      Yes the late 1970s to 1980s were great change jobs every year or two. Other excellent method ” I took an interview and have an offer for 50% more what would you like to do” ? 1981 to 1983 chemist salary went from 15k crap benefits at state to 38k excellent benefits corporation with just 2 interviews. Better known as calling BS. Keep Smiling enjoy the pay back.

    • NBay says:

      Damn. Lost my Disco Sucks T-shirt, too.

  4. Beg4mercy says:

    The wage increase perception fits pretty well with the narrative that real yields can grow far higher. Money market funds may potentially rise to 6%.

    That’s connected to the very weird Wall of Worry, where the narrative suggests equities are about to boom again — but, this sticky inflation, high rates thing is different this time with the mega-monster deficit and treasury costs associated with debt cost.

    Maybe it doesn’t matter, but sense inflation is apparently rising, along with yields and higher wages, the entire mess is worrisome!

  5. Dr. Wolf says:

    But the Flight Attendants are disgruntled at the enormous rate increase the pilot got.

    • JD says:

      They’re sky waitresses/waiters. They shouldn’t even be talked about in the same breath as a highly paid and well educated pilot. I love how their union likes to pretend they are in some way irreplaceable.

      • Cold in the Midwest says:

        Correct. A friend of mine who has been a flight attendant for years describes his position as a “flying busboy.”

        That doesn’t stop them from strutting about like peacocks though. As if they have some critical skill the airlines would have great difficulty replacing. Which is nonsense.

        • vecchio gatto veloce says:

          ‘Waitress In the Sky’

          “She don’t wear no pants and she don’t wear no tie
          Always on the ball, she’s always on strike
          Struttin’ up the aisle, big deal you get to fly
          You ain’t nuthin’ but a waitress in the sky

          Paid my fare, don’t want to complain
          You get to me, you’re always outta champagne
          Treat me like a bum, don’t wear no tie
          Because you ain’t nothing but a waitress in the sky

          Sanitation expert and a maintenance engineer
          Garbage man, a janitor and you my dear
          A real union flight attendant, my oh my
          You ain’t nothin’ but a waitress in the sky”

          -Paul Westerberg & The Replacements, 1985
          (Paul’s sister, Julie, was flight attendant @ Northwest Airlines and Delta)

      • SwissBrit says:

        Clearly pilots and flight attendants are not at the same level of training and expertise, but denigrating them as purely waiters/waitresses shows a complete lack of understanding of the safety part of the job, which is their main and most important function; passengers only get to see the food and drink service if all goes well, but when it doesn’t all go so well, the safety training that all flight attendants have to do cand and does save lives.
        Do you honestly think that cost-saving airlines wouldn’t completely do away with flight attendants if they didn’t actually need them (or were forced to have them) for anything other than drinks service?

        • Cas127 says:

          I think some of the (clearly excessive) abuse is ginned up in order to distract everyone from asking *any* questions about just how automated (very) the flight crews’ job really is 97%+ of the time.

          In fact, had it not been for passenger worry/fear, the *entire* piloting job might have been automated many years ago.

          (In many ways – not all – the piloting job is a lot more amenable to successful automation than driving in street traffic).

          An increasingly smaller and smaller number of “piloting” tasks are not automated – the flight crew has been doing a *lot* less for *many* years.

          They are kept in the loop to address the malfunctions that occur much, much less than 1% of the time and to re-assure passengers that the airlines are also providing hostages to fortune.

          Had passengers not been fearful, the entire piloting process might have been entirely automated quite awhile ago.

    • El Katz says:

      There’s a shortage of pilots… but probably not flight attendants.

      • Kent says:

        I’ve got a guy who works with me who is an ex-pilot. He was laid off during COVID and never went back. He only makes $80k/year but considers it worth it (was over $250k as a pilot), but has a 5 year old son that he is finally getting to know. He is getting big offers almost weekly from the airlines.

        • NBay says:

          Doesn’t sound right to me. Have a 57-67 AA pilot relative and always heard he was always home. About ready to retire, I think.

  6. Anthony A. says:

    I was visiting a relative in Cary, North Carolina this last week. We, the two of us, went out for breakfast to a fairly nice chain restaurant and I ordered black coffee with my eggs. The coffee was $3.69…………Breakfast for two, including the “lowest” suggested tip on the bill (20%) came to $37.50. Good thing my companion ordered just water instead of coffee or juice!

    This ain’t Starbucks or NYC either.

    I guess the paid help has risen there also.

    • Gabriel says:

      My wife and I use to look forward to coffee on the road when we go on trips. Dunkin’ is our favorite but it has gone from $3 to $4 and now it is over $5 for two medium coffees. Not as much as your $3.69 but my point is we no longer get coffee on the road. We just make a full pot early am and take a large thermos with us.
      5% treasury bills are great but not enough to keep up with inflation. Our habits have changed.

    • Miller says:

      This is the ultimate price of the Fed’s stupid, short sighted ZIRP and QE policy and the resulting asset bubbles, esp the housing bubble and terrible spikes in basics like rent, food and going to college, and another reason the Nobel Prizes are practically a laughingstock for rewarding Ben Bernanke (and by implication Alan Greenspan) who pushed this disaster of loose money policy for almost 40 years. It’s not that Americans can actually even afford that much more with these raises due to all the inflation, it’s that everything’s gotten so much more expensive that they can barely keep up. So the increased salary demands aren’t really doing much for their buying power, Americans are treading water at best. Workers aren’t being greedy, they need this to survive with everything being so much more expensive.

      And there’s a nasty price for all this like one of our own consortium’s economists pointed out. Because these increases in costs for things like rent, housing, food, healthcare and college are also leading to the strikes shutting down Hollywood and other industries, and driving up costs for businesses across the country. Which is strangling our companies ability to compete in both at home and global markets, because our costs are too high. The USA lost tons of businesses in the GFC partly because healthcare was so expensive for their own workers and not for foreign companies who out-competed on price, now it’s happening all over again. That’s what Paul Volcker realized 40 years ago, it was temporary pain for the gain of saving the US economy and American business from spiraling costs at home. And it’s looking JPow is going to have no choice but to get even more aggressive, follow in Volcker’s footsteps.

      • Tom H says:

        What you say rings true to me. What you didn’t say, as Jeremy Grantham eloquently described as the giant vampire squid of financialization, plus the Trump business tax cuts, the handouts to farmers, covid handouts, forgivable loans, and sundry programs and bailouts that have run right on through the Biden administration as well… People have eyes and they see nothing trickling down. Now that labor holds a better hand of cards they can’t be blamed for playing what they were dealt.

        The problems go deeper and started long before QE and Zirp. How about the Bush tax cuts or un-funded wars in Afghanistan and Iraq? Why were the airlines all bailed out? Why do they keep bailing out banks and auto manufacturers? We do not have a capitalist system when profits aren’t fairly taxed and losses are socialized.

        So I agree with your views and I think our predicament runs a little deeper. The one area I might question would be our global competitiveness. The US produces some great products, our great abundance in resources and talent is competitive across many sectors. Just because the prevailing sentiment has a negative tone and we’re seeing some discomfort doesn’t mean we’re doomed. (not to put words in your mouth)

        What would seem like stimulus, socialized losses, tax breaks, handouts, and all the other things really should be seen by people as currency debasement. I wonder what the ratio of our national debt to some component of the money supply over time might show in relation to this debasement.

        Enjoyed your post and thought I’d chime in. Thanks

        • Northwoods says:

          This comment thread rings home for me too. United States has a natural geographic setup to succeed: a large moat on each side, we generally get along with our 2 neighbors that are north and south of us, some of the richest farmland land in the world that is close to a river/Great Lakes system to affordably transport goods cheaply.

          Somehow, despite this huge natural advantage, we seem to be screwing up our competitiveness globally.

      • Dick says:

        Good post Miller. My observation is that some are treading water with more folks behind in terms of pay raises. There is always the spread. Between employer… and new employee and old employee. Employers do the best they can to absorb the difference into their own pockets. That’s what churn is all about. @Wolf. This seems like a game of chicken at this point between Powell and the labor market. My opinion is, but feel free to disagree, is that the labor market will break first. It has to, else there is no end to the spiral and those working (seeking raises)… literally destitute the fixed income cohort.

      • Debt-Free-Bubba says:

        Howdy Miller. Amen Amen. Only criticism I have is that the strike in Hollywood is a good thing. Hope the writers never come back….

        • JimL says:

          Why do you hope the writers never come back?

          Hollywood is a huge American success story. The media it produces is one of America’s biggest exports. It directly employs 10s of thousands of Americans and indirectly supports much more.

          Why do you want to kill that golden goose?

      • The Real Tony says:

        Bernanke kept real interest rates negative all that time resulting in everyone getting a lot poorer since 2008. The Fed funds rate should be above the inflation rate not continually below it.

    • ru82 says:

      WSJ just had an article….. Could this be the end of super cheap stuff.

      The Chinese factory workers who moved from the rural farms and have been toiling in the factories the past 20 years are all demanding raises and perks. Why… because their kids are now turning twenty and these kids do not want to work in a factory.

      China has an employment problem. Not enough factory workers and high employment for young adults. A lot of these young adults have college degrees and their expectation is that a college educated person does not work on the factory floor.

      Net result is Chinese factories that are having to give big pay raises while they also have an lot of unhappy unemployed young adults. Plus expect higher prices for all the cheap stuff on Amazon. Better stock on on iPhone cables. LOL

    • Northernlights says:

      That’s close to where I live, and I think prices have gotten silly.

      Once unsweet tea went above $4, I went on strike. I either buy beer or drink water, but whatever the case if you tip well the waitstaff doesn’t care!

      $4 bag-in-box-soda makes as much sense as $250/ft2 real estate around here.

      • Kent says:

        The only reason we have inflation is because people pay higher prices instead of changing their habits.

        • KingKong says:


          you’re absolutely right. I’ve seen people in my life complain about higher prices, but they’re still buying.

          This is why the Fed will have to keep raising rates until it becomes more appealing to save than spend.

          That might be really tricky because as Wolf has pointed out, retirees are loving their 5% interest on saving and spending it like drunk sailors.

          Something will have to give.

    • NBay says:

      The suffering is everywhere.

  7. Harvey Mushman says:

    At my company I have been seeing quite a bit of turnover this year.

    In around April, the main IT guy at my facility was let go. He had started here in 2012. He is 50 years old. He was replaced with a guy who is around 35.

    The new IT guy quit last week.

    Our old IT guy (the 50 yr old) found a better job no problem.

    Also, 2 weeks ago a Quality Engineer gave his 2 week notice. I heard he went to work at one of the UAV companies in the area.

    • Letro says:

      Hi Harvey, The non management still is clueless the 50 year old employee left with thousands of secrets never to be discovered. Let me guess the guy who let the IT guy go was 35 year young hot shot soon to be very gray with ulcer. lol.

  8. Timothy J McLean says:

    Credit to Zoltan Pozsar. “Volcker was lucky.” Volcker had energy prices, wages(Reagan fires PATCO workers) & Geopolitics moving lower in 1981. Today, energy is in short supply(50% less spending on exploration over past 10 years), wages goosed by a union friendly administration and Geopolitics on steroids.

    • Hubberts Curve says:

      You are very right. Reagan and Volcker had the best of all worlds to crush inflation. In addition to all the things you just mentioned the debt load on consumers, companies and government was also much lower so Volker’s Cudgel of high interest rates was painful but didn’t destroy the economy. At that time half the population didn’t even have credit cards and most car loans were 2 years. The Alaska Pipeline and North sea oil came online about then giving, us 25 years of energy cost tailwinds in our sails.
      Now we have a future of energy cost increases, and a geopolitical empire that is crumbling like a month old wedding cake. Taming our current inflation beast will take a herculean effort, and I am not sure we are up to it.

      • Robert Hughes says:

        81 to 85 went to Alaska
        State had so much oil revenue construction boomed in every city, village and hamlet. Shortage of workers pushed wages and costs skyward. 85 oil prices dipped and brought reality back. Revenue still flowed but no more expensive parties.
        23 a different world, oil revenue a fraction of the old due especially steep decline in production. State in very deep economic problems as there is no new golden eggs coming. Costs for living are unreal. Daughter lives there so weekly reports. Beautiful but …..

        • NBay says:

          Plus a lot of small businesses of all kinds went away, never to return…..a corp theme that continues today on into PE and maybe NO public stuff? Nah….Planet will cook, rioters will die before then……..those wealthy left will hope, but eventually die, too. If the nukes don’t fly, and the climate allows, some pockets of “REAL” rugged individuals will make it.
          I wish I was around to see the rich deal with their “security” people! Only reason I see for an afterlife…..that’s enough……vanish into the cosmos with a smile and a laugh.

        • NBay says:

          Should have said “vanish back INTO the cosmos”

          Goin home!

      • NBay says:

        The cost of the Vietnam war was good for many businesses and getting impossible to hide, so they just let inflation rip. International and local bond vigilantes were more than bothered, so yeah, good opportunity for the Reagan-puppet to really trash unions and the low income workers/savers. And look at the jailed Americans curve take off when he got elected! Along with S&P. Besides, Carter, being honest, committed “consumer-nation” political suicide. How could he lose!

        “….where free unions and collective bargaining are forbidden, freedom is lost.” -Reagan Labor Day speech 1980.

        Just the first lie or country damaging part of his script. Pretty good movie for a senile previous union Prez “B” actor to land. Think Heritage Foundation wrote the entire script.

        You want to have a banker hero in that mess? FY….be my guest.

      • The Real Tony says:

        It was a much younger workforce back in the 1970’s with a lot fewer retirees. Today the higher rates are helping all the retirees of which there’s a lot more which wasn’t the case back in the 1970’s.

  9. Stop blaming unions. This inflation is service industry, mostly residential, the guys who put gasoline in the lawnmower. Hotel maids, not so much. All of them pay more for rent. Ca. never had a pullback in gasoline prices. So this will go on, meanwhile China is imploding. Real interest rates are positive, and you don’t imagine the Fed likes that? While both are nominally high? Colas and cost to service the debt move higher in lockstep? Crash the economy and then you end up paying expanded benefits to people who used to be paying taxes. They need to sell a whole lotta bonds, and where is the investment cash going to come from? Wanta buy some Nividia stock, cheap?

    • rodolfo says:

      You are right. But don’t forget the union strength. Go Google UPS union wage increase.
      When that wage increase hits the economy along with other union contracts it definitely affects inflation

      • Apple says:

        I think it interesting, that when the corp tax rate was cut 6 years ago during the previous administration, no one complained that giving corporations all that extra money would lead to inflation.

        • kramartini says:

          Not interesting at all. Cutting tax rates does not increase the marginal cost of production. Raising wages does increase the marginal cost of production.

        • Doolittle says:

          This is such bs. Corrupt gov over spending got us here along with “free” money. The last thing these criminals need is more money to piss away to their buddies.

        • Bobber says:

          Issuing government debt to cut taxes IS inflationary. There should be no dispute there. It’s free printed money handed out to tax cut recipients.

          The handout bypasses the production cycle.

        • Richard Craig says:

          No one complained about inflation, because that is not inflationary, they (guess who) complained that corporations were no longer paying their fair share (which is never defined). And the corporations were not GIVEN anything, they were simply allowed to keep more of what they already had.

        • 91B20 1stCav (AUS) says:

          R.Craig – I recall corporations being given the rights of citizens and an exemption from the draft…

          may we all find a better day.

        • Happy1 says:

          Unm, taking less taxes isn’t “giving” anything to anyone, it’s allowing people or businesses to keep more of the money they earned. That’s a good thing!

      • Flea says:

        Workers are not the problem,it’s incompetent Ivy League management . That probably grew up with the silver spoon . Never washed clothes cooked a meal or grocery shopped .No concept of reality . We need to go to a system where CEO only gets 7x of lowest paid employee .when SHTF the elites will be just as poor as us I can’t wait

        • NBay says:

          That’s good, but I haven’t posted Constitutional max net wealth, around $10M-$15M for a while. Just make the IRS a full fledged part of the military……kinda like how the Coast Guard chases down fake Gucci purses…..just part of keeping everyone honest.

          Special forces landing HALO parachutes on roofs of Cayman, Swiss, etc banks and in and helicoptered out FAST with paperwork, (including vault contents, pictures) and some plausible denial, even. Blow up a shrine close by. Damn terrorists!

      • Herpderp says:

        Im a non-union employee and I got a larger raise than them. Everyone should be getting a raise now. Record profits means record raises. Anyone staying at a job not increasing their pay while prices explode is a fool, especially in this labor market.
        “but that will drive inflation!”
        Then I suggest you volunteer for the first paycut to stop the trend.

      • Sufferinsucatash says:

        Most of UPS’s driver wage increase is hot air. On paper it’s not that great.

        I think they claim their benefits package is worth 50k? Pshhh

        Those guys bake their bodies and ruin their joints. Whatever actually makes it to their 6 kid household, good for them.

    • Doolittle says:

      The corrupt unions are absolutely part of the problem, but just a part. Being a big buyer of corrupt politicians leads to all kinds of problems and inequities.

    • info says:

      If Union doesn’t also improve quality of work wouldn’t wage increase simply be inflation?

      • Kent says:

        Only if people find the value of the product worthy of paying the higher price. In which case you have to blame the CEO for underpricing the product all along.

      • Neal says:

        Unions do not set quality standards, managements do.

        • NBay says:

          Happy workers do…..In Japan they even help the managers out, or did in the past. Don’t know if everyone is playing “winner take all” now……bad game….very bad.

      • sufferinsucatash says:

        CEO thinking:

        “Without unions I can buy the $200 million yacht. Not be some peasant in the $150 million one.”

        Buy that coffee peeps.

    • Miller says:

      That’s what’s ultimately feeding those new strikes every week in L.A., rents and home costs got even more ridiculous than they were before and refused to adjust downward, it got literally impossible for people to survive there on previous wages so the strikes there by everyone are about sheer survival–the writers, actors, hotel workers, public workers, delivery drives and practically everyone else. Those economists during the golden period of 18th to 20th centuries warned about this, when you let the rent seekers suck the lifeblood out of the economy with higher rents (including literally rents on homes), you cripple the competitiveness of the country because the workers need higher pay to survive, but then goods and services become so expensive that competitors soon eat them alive with lower cost but similar quality products.

      Again this is what Volcker keenly saw, for the US to survive economically we needed to keep the costs of rents down for our goods to have any chance of selling in volume. The Fed’s failure under Greenspan and Bernanke to do this leading up to the GFC with housing bubble 1 and healthcare costs, led to a terrible number of our own companies collapsing and getting devoured by overseas competitors. And now it’s happening again, costs for US businesses are much higher than for competitors even in other developed countries because housing, college and healthcare costs here all got propped up by asset bubbles, that means higher costs for labor and everything else and it means we can’t be competitive with major companies from other countries that don’t have these costs pushing their prices higher. The only way for them to survive in 10 years is for the painful process of deflating those asset bubbles to go forward, in other words Volcker part 2, but it remains to be seen if Powell and the current Fed have the guts to do what’s needed.

      It isn’t just housing of course. Other countries have the advantage of less costly rents and housing than the US, but also certainly much more affordable healthcare and colleges so their workers have better buying power, don’t need such high salaries to get basics and they outcompete us. And that’s the other problem–despite the usual overheated headlines (hard to take them seriously anymore, it’s well beyond boy who cried wolf at this point) China isn’t imploding at all, if it was that would actually decrease demands for oil and at least provide some relief. But they’re actually increasing their raw materials and oil and coal purchases, and any case the markets clearly don’t buy the “collapsing again” narrative because the risk premiums for investors haven’t budged. Evergrande was on its way out months ago so it’s bankruptcy now is a formality, and the mild deflation for them now is helpful because, unlike us here, it means their central bank has much more room to cut rates and give stimulus. Though they’re doing this in more cautious doses than our reckless Fed here in the pandemic. That’s a good thing for us too, heavy stimulus there would push global inflation out of control.

      • Dick says:

        There is a big difference between Living and Survival. So… those the writers cannot ‘live’ out there. Good. I haven’t seen a movie worth a damn in 10 years. I hope all those people steal a tent from the nearest bass pro. They can ‘survive’ there.

      • KGC says:

        If, after being told by the Gov’t I couldn’t collect rent for two years because of COVID, and I still had to pay the mortgage, taxes, and repairs on the property, I’d probably be inclined to raise the rents too.

        • BP says:

          The landlords were all paid back. They got their bailout on top of whatever stimulus they pulled in during the pandemic.

        • Rent, WA state says:

          I paid rent all thru Covid. Not one missed payment. Rent increases each year 7 to 8.5%. Apparently they could not evict a tenant who broke into his neighbors apartment…that’s what I was told. That doesn’t make sense.
          Washington state.

          My rent has increased at 4.7% annual rate over 23 years. Was close to 4% but last 4-5 years higher increases.

  10. Thetenyear says:

    So the drunken sailors expect an 11.8% increase in a 3.5% inflation environment. Employers were happy to play along when the could pass higher costs on to customers. Those days are over. So employers need to accept lower margins or lay off workers.

    Either way, we are not going to see 11.8% raises.

    • Steve says:

      the coil spring of layoffs is wound so tightly now that when it explodes…. so many six-figure jobs will go to…nothing.

    • Miller says:

      Being fair, it looks like that 11.8% number is an average, obviously propped by CEO’s and VP’s making demands that push the average way up. If we look at the median for the big majority of jobs not skewed by the high rollers, it’s probably going to be at a more reasonable level.

      But it’s totally fair for workers to demand more now, it’s not just the current inflation rate, it’s the cumulative effect of the uncontrolled inflation since early 2021. Rents and housing costs in the US esp have gone totally out of control and it’s getting hard even for skilled workers and professionals in major cities to afford them. Of course like talked about above, there’s a heavy price for this–just like with the Great financial crisis and recession in 2007 to 2008, businesses are being squeezed with higher and higher costs and can’t compete with competitors overseas where countries don’t have such high costs for basics like housing, healthcare and college. So we’ll continue to lose ground to companies even in other developed countries. Inflating asset bubbles and allowing inflation to run hot was always stupid policy and Bernanke and Greenspan should be taken to the woodshed for it, as it happens, now it’s looking like JPow and the current Fed have no alternative but to go full Volcker in shutting down the current bubbles.

      • Wolf Richter says:

        “obviously propped by CEO’s and VP’s making demands that push the average way up.”

        You gotta get that out of your head. They’re such a minuscule minority that they have no impact on data like this — look at the average dollars. Here we’re talking $60k and $70k, which is barely starting wage in San Francisco.

        If you want to look at factors that might skew the data look at the large number of highly skilled workers, from electricians to coders and airline pilots (Delta, AA, etc.) that pull six-figure salaries. But then that’s where a lot of the wage pressures really are: in services.

        • SpencerG says:

          Services Inflation personified…. I just got my GEICO auto insurance automatic renewal today. Monthly insurance premiums on a 22 year old SUV just went from $88.29 to $105.79 … a 20% rise on an account with no claims whatsoever since I have been with them.

        • Wolf Richter says:

          I got my email notifications that the documents were ready to look at (renews in September). I’m bracing for impact.

        • Miller says:

          Point well taken. In any case the main cause at the bottom for the inflation esp in services to begin with was the Fed’s ham handed policy ZIRP and QE policy to begin with that drove up the prices of housing and other key items to begin with. Without that pressure, there wouldn’t be this resulting pressure across the board to raise wages just to afford these things. It all rolls downhill, and it was Fed mismanagement for years that got this heavy stone rolling to begin with–going back to Bernanke, Yellen and Greenspan here, so not just something we can lay at JPow’s feet.

    • georgist says:

      There are less workers.
      Let me square the circle for you: lower profits

    • VintageVNvet says:

      ya might want to look at, at least, the total aggregate inflations of NECESSITIES over the last couple of years since ”raises” for labor 10Y!
      Easy to lose track of aggregate or cumulative inflation,,, WHOA, maybe exactly what the rich folks WANT us to do, eh? while profits go to the moon., etc.
      Folks need to keep always in mind that the USA FRB was started so as to maintain the rich folks, banksters et al, against the little old ladies of all ages, gender identifications, etc., etc. who had been putting their gold into jars in the back yard in the good times, then buying all kinds of ”assets” for pennies on the dollar.
      After all, can’t have those grannies living a long comfortable life, eh?
      OH, wait,,, SO similar today with the elderly getting wiped clean in more ways than one…

      • NBay says:

        Fractional Banking has inflated things so damned much since 1913 that the old mattress or back yard jar is not too safe anymore for the avg old person……size of stash has to be too big! But I’ll bet there is plenty gold under Aspen and Tahoe vacation homes, forgotten about by all but a few.

  11. jon says:

    Thanks WR for this report.
    Your last few reports basically state that Inflation is on fire and would get worse before it gets better.

    I am curious, if Powell think the same and would give out hawkish statement during Jackson Hole PC.

    • Wolf Richter says:

      Powell will likely stick to the script: “higher for longer.” Maybe not much higher, but a lot longer.

      The bond market is finally coming out of denial and is abandoning its fight-the-Fed strategy. Longer-term yields are coming up finally, which is expected to do the heavy lifting on the inflation front.

      Average 30-year fixed mortgage rate today at nearly 7.5% is also going to do some heavy lifting…

      • Wes says:

        Yes, definitely higher for longer.

        • JeffD says:

          Until there is a “crisis” and they cut FFR by 2% overnight. Lol!

        • Wolf Richter says:

          They hiked during the banking crisis in March, LOL.

        • Miller says:

          yeah the Plunge Protection Team probably isn’t happening again, not anytime soon and probably not ever. It was that trigger finger for too-loose monetary policy that got us into this mess in the first place, going on for nearly 40 years. And now the Fed is a huge pickle as inflation esp in services stays sticky. It’s rapidly driving up the prices of American goods and services both at home and abroad and making us uncompetitive with other places that don’t have these high costs for basic goods like housing college and healthcare, that’s one of the things that led Volcker to raise the alarm in the first place in the 70’s. Remains to be seen if JPow and the Fed today have the guts to do what’s needed to keep inflation from spinning out of control.

      • Citizen AllenM says:

        For the win, we may see a 10 percent 30 year mortgage next year. And house prices will continue to adjust to fit the monthly payment Capital hasn’t been scarce for years….

  12. Ev Last says:

    How can the bond market expect a return to low interest rates? They used to be at least a bit smart; remember the “bond vigilantes”? Now they just look at dot plots and believe what’s there. Return to low interest rates can only happen if something blows up. This inflation is sticky.

    • Miller says:

      Doubting the bond market is really expecting any return to lower rates in the near future. Doesn’t even take bond vigilantes to enforce discipline anymore, rates are going higher and nothing will stop it. Besides the ongoing crisis of inflation and the US dollar’s buying power plunging like a stone, there’s also the huge drain from the Treasury auctions to cover the new debt, the interest on the national debt alone now shooting past $1 trillion, the Fitch downgrade, QT really starting to bite (including those MBS’s rolling off, which should never have been QE’d to begin with), political paralysis and the ongoing bills even now to deal with things like the Iraq and Afghanistan war veterans costs. Despite the sucker’s rally in the S&P and Nasdaq yesterday–aka the big boys pumping up the markets to reel in some dumb retail investors to be their bagholders–yields kept marching up and there’s no stopping them. Bond buyers know what’s up and yields have only onward, upward to go.

      • georgist says:

        YouTube was full of “the bond market is never wrong” ‘experts’ right before the crash.
        They herded in retail then the plug was pulled. Nice work!

        • Miller says:

          lol yeah, looks like we’re getting to see a re-play right now before our eyes

  13. Brendan says:

    Our clients run the spectrum of business and occupational classification. We have heard from one, then another, then another, etc., that there are myriad professions that have hundreds upon hundreds of vacant positions. These are not pencil pushing, cush white colla jobs. These are front line, future impacting roles. Teachers. Nurses. Caregivers. They have had enough of our bullshit and are NOT coming to work any more for the pittance we’ve been paying them. We are going to have to offer these people a magnitude of what they have been earning.

    • Anthony A. says:

      Us retired folks are looking at an estimated 3% raise in Social Security checks for 2024. Doesn’t that just sound peachy?

      • Lili Von Schtupp says:

        Us younger folks who came up in multiple economic setbacks are looking at maybe getting a percentage of Social Security what we paid in, a debt burden and a cost of living far worse than our parents ever faced. Also peachy.

        Its a big bed, its been made hard by decades of poor policy, and we all get to lay in it.

        • Lili Von Schtupp says:

          Well, not all of us lay in it. But you know who I mean.

        • William Leake says:

          You just keep working hard to pay our Social Security and Medicare. Complaining does no good unless you are willing to do something about it. Maybe things will turn around.

      • curiouscat says:

        That sucks if you rely on only SS for your retirement income. But if you have a cool mil sitting in your 401(k) accounts you can pull down about $50k annually just by putting it in a Federal Money Market fund. Things ain’t all bad.

        • Bobber says:

          Even if the cool million matches inflation, it gets taxed, so you wind up losing.

        • Anthony A. says:

          Yeah, SS helps, but doesn’t cover the bills and my IRA RMDs are taxable, which makes the SS 85% taxable. So I pay a good chunk of taxes. Plus, my wife passed last year and as a single person, taxes hurt worse.

          I have no pension since I worked in private industry. If I was a government employee during my career, I would be golden now.

          Medicare and drugs cost a lot more than when I had a private plan when working (before ACA).

          Besides fighting inflation as an old person, your body starts falling apart and hurting more often. Yeah, I know, there are drugs for that…but Part D ruins the fun.

        • w.c.l. says:

          Who said rates are going to stay at 5%? They may or may not but I wouldn’t be basing my life on that assumption. Look what’s happening to the folks who assumed ZIRP was the natural order of things. It’s nice to finally get a decent rate of return, but I wouldn’t take it for granted it’s always going to be that way.

        • NBay says:

          Sorry to hear that as a single person you are now suffering so very much more….economically.
          Sorry about wife dying, too, but she was costing you a lot of money you said, ie $4K Oxygen generator medicare didn’t cover.
          And now expensive restaurant meals and transport TX to NC for companionship.

      • Coffee says:

        Better then the 2% yearly increase across the board in IT at my company.

        • jon says:

          For last 3 years, we go raise of 15% or so.

          One of the the largest employer in southern CA large city is laying off thousands of people in next 2 months or so.
          All jobs paying more than $300K.

      • Wolf Richter says:

        You got an 8.7% COLA this year, well above average wage increases over the past 12 months.

        • Julie says:

          Pardon, but 8.7% is peanuts given my paltry SS payout which is a regressive tax on salary, on labor, on my life long LABOR.

          My 8.7% was chump change. Only in the U.S. is this miserly payout considered a safety net. And don’t get me started on medicare. What a joke.

        • Wolf Richter says:


          Go to Germany and try their public pension system, LOL. Not even poverty level. And since the self-employed don’t have to pay into it, and if they don’t pay into it because they don’t have to, they have no pension at all when they retire. They get welfare and a few other subsidies. You’re talking abject poverty and misery.

          But the 8.7% COLA was nice, and if you poohpooh it, maybe you should try to live on the German public pension?

        • Anthony A. says:

          No complaints about the good increase last year. There have been some years (2 recently?) where the increase was 0%. But at least they didn’t pull back money.

          And, of course, we get occasional increases in Medicare Premiums to go along with the COLA’s

          No performance bonuses like the good old days, though. LOL!

        • NBay says:

          MUCH better!…Thanks!…..it did sound low

      • Nefff says:

        Uhhh, dont worry, I have it from a good source that they will make it up in next years cola.


      • georgist says:

        Have less avocado toast.
        Ps the establishment are going to drop you like a hot brick one demographics tip.
        You could have had solidarity with younger workers, too late now.

      • NBay says:

        That’s almost 1 every 10-11 days grocery shopping trip for me. Better than a poke in the eye with a sharp stick….as long as I’m one of the ones they don’t turn Medicare up on….that called hold harmless?

    • Chris says:

      Is the offered wage too low? Or do the qualified workers actually exist? Personally, I can’t tell the difference. In some sectors, it seems like there is a shortage even at really high offering wages.

    • Flea says:

      My niece might go to New Jersey to work as a nurse at a hospital on strike. $7,000 a week plus cabs and hotel . Said she will only work 2 weeks then back to Sweden ,wants to live there permanently

      • Auld Kodjer says:

        Nooo. Not to a “socialist” country that is forever found in the top 10 tables for livability, happiness, wellness, education, democracy.

        If and when you also move there – which will make me envious – you will then be known as Flyga.

        • rick m says:

          AK- I have family near Gothenburg, but I’ve only been there and vacationed in Lapland in high summer. Too used to sun and warm weather to take those dark winters. The heat and humidity of the Gulf Coast are an equitable trade for our pleasant, temperate winters.
          Socialism never survives culture-mixing. Sweden was very different thirty years ago before mass immigration from the Eastern European and Eurasian areas. West Germany was flooded with Turkish and Yugoslav guest workers in the sixties and seventies, and many found a way to stay and raise families. But I remember how my coworkers in Bavaria talked about them. And most guestworkers didn’t live well at all. It was just better than where they had come from.

    • KingKong says:

      You’re absolutely right. Society is truly held together on the backs of these frontline workers, who have been abused and exploited for far too long.

      Their patience and mercy has run and they are rightfully demanding they get paid what they deserve to. And boy, do they absolutely deserve to get paid handsomely for the genuinely essential services they provide.

      I look forward to seeing the waste get cut out in order to pay the people who keep everything running.

  14. Wes says:

    Maybe we’ll find out more what Powell and the FOMC is thinking at the Jackson Hole Symposium August 24-26.

  15. Brant Lee says:

    What you gonna buy at $78,600? It’s starvation wages in the city. Commuting to work 5 days a week ain’t living. You’re doomed if you have kids.

  16. kramartini says:

    It is not surprising that we have inflation now. It was surprising not to have had inflation during ZIRP. An interesting topic for academic study.

    • LIFO says:

      ZIRP was designed to produce asset-price inflation, and it succeeded too well. Who would you have perform this academic study? Economists in general or the Fed’s young Ph.D.s who never experienced inflation? Which school of economics teaches how the economy actually works (Keynesian, Chicago, Austrian, Marxist, Modern Monetary Theory)? Would you ever consider traveling by air if engineers couldn’t agree on the principles that enable airplanes to take off, fly, and land safely?

      • roddy6667 says:

        Economics is not a science. It is a study of the interaction of human activities with goods, services, politics, and a lot of other fuzzy factors. IMHO, all economic theories are wrong. They may be right for a brief, shining moment in history, then they collapse onto the dung heap of intellectual efforts.

        • ru82 says:

          Yep. Bingo. I was just listening to a good podcast from a well distinguished economic professor. He said the US Government debt growth is unstainable on the current path. The CBO even says so.

          At some point they will need to cut entitlements or they will need to print. What he means buy print is there will not be enough US treasuries buyers and the FED will print and buy the excess bonds.

          He admitted that they really do not know what exactly drives inflation and how to control inflation. (They know what can cause increased inflation of course but controlling it it hard) There are two many independent variables.

        • Mitry says:

          Economics is absolutely amenable to science. Look up Per Bak and his work on self-organizing systems. An economy can be described as an open thermodynamic system. Not to say that all economists are scientists…

    • jon says:

      Even during ZIRP, inflation was present but hidden.
      During ZIRP inflation was in assets and asset holders made it to bank laughing. Remaining people have been rendered homeless forever.

      • ZIRP says:

        Wolf claims savers are pleased with 5% yields and spending it. To what degree though ?

        Assets, housing and stocks have risen nicely for 10 years. Surely investors would not have saved all those good returns. They too were spending it… again how much ?

        Yet inflation was (supposedly) pretty tame from 2010 thru 2019. The numbers say so.
        This suggests that 2020 to the present, with much higher inflation, are a result of the excess pandemic spending, supply constraints, in addition to the low interest rates.

        Most commentators here complain about ZIRP…quite forcefully. How do they explain the low inflation of 2010 to 2019 ? Okay, 2010 to perhaps 2013 coming out of the GFC…maybe a different societal mindset.

        I’m actually just wondering…and not really expecting an answer I can trust. Sorry, but true. Willing to listen though.

        I’ll grant you ZIRP’s overall effect the last 12 years has generally not been good for poor (those who were non asset holding) Americans… left further behind. Some poor people, maybe a small percent, especially in less expensive parts of the country, may have benefitted from ZIRP in that they bought a home, got a nice 2.5 to 3.5% mortgage. Can’t deny that right ?
        But how many benefitted ?

        Numbers are needed to have any chance at providing good answers for so many questions. Sometimes simple numbers aren’t sufficient either.

  17. LouisDeLaSmart says:

    People would not be asking for more if the prices of critical life determining goods (college, housing, healthcare etc.) did not inflate so much in the last 20 years. Not to have expected such an adjustment is naive and malicious on their behalf.

    • Wolf Richter says:

      It’s funny… Just just read a FT headline that UK FTSE 100 company executives got 18% pay raises, for example 18% of GBP 20 million = a raise of GBP 3.6 million.

      And then they complain that their workers are asking for 6%, for example GBP 50,000 = a raise of GBP 3,000.

      • LouisDeLaSmart says:

        Significant bonuses and pay rises of CEOs are usually a good predictor of crisis times, as they tend to know about events ahead of time, and take the opportunity to grab “while there is still something to grab”. But that title just seems like “if they can get 6% we should get 16%”…
        I wonder, if ENRON would rise from the dead, would today their operations count as fraud or business as usual…Maybe they were just ahead of their time… :)

        • 91B20 1stCav (AUS) says:

          …speaking of ‘rising from the dead’, I still can’t kick the thought that a cosmetically-altered (mebbe not even that) Kenny Lay is sunning himself happily on a tropic beach…

          may we all find a better day.

  18. Powell can thank Bernanke for all this nonsense (started by Greenspan). The Fed can’t possibly normalize this FUBAR situation.

  19. DownFed says:

    I don’t see it as the drunken sailors. It’s the drunken captain, who with a $1 trillion deficit, which acts like a stimulus, along with depleting the oil reserves until July, has continued to overheat the economy.

    The Fed interest rate is only at the inflation rate, so that’s neutral. The fiscal policy is run deficits, so the overall policy is still stimulative.

    • JimL says:

      You have some pretty screwed up glasses you see through if you are blaming it on the captain.

  20. William Leake says:

    The wage-price spiral is starting to kick in. The Fed can keep raising rates, but in a strong economy scenario, it will not do a lot of good (see the last year and a half). Of course, if the Fed had not raised rates, the wage-price spiral could now be worse. The Fed failed because it did not raise rates fast enough, even though it was perhaps the fastest on record. Other rate raising periods were not preceded by a decade of ZIRP. To Powell: higher, longer.

    Something will break, but I don’t think the Fed will do or can do much about it. It already bailed out the banks with now apparently unlimited deposit insurance (it used to be $250,000) and the BTFP. I am not in the stock market, but for those who are, you might want to be a little nervous.

    The housing market is somewhat frozen until prices come way down. Owners are stuck with 3% mortgages (they cannot or will not move). Buyers know prices will drop, so they simply wait. Real estate brokers might want to learn to bag groceries.

    • Low mortgage rate says:

      Transactions are down, but isn’t it like a 20% drop YoY ? Not trivial but not 50% either by a long shot. (I’m a renter by the way, not looking to buy). Apparently a much higher than usual percentage of purchases are new construction versus existing homes.

      Why are owners “stuck” with 3% mortgages ?
      That seems to be common language here. But at other media locations home owners gloat about never giving up their darling 3% mortgage.

  21. SOL says:

    I requested a cost-of-living adjustment from my employer. I expect nothing less than 15%-25%.

  22. BrianC - PDX says:

    From 2002 to 2019 we were able to raise our SW contracting hourly rate by $10/hour. Clients howled at that, but paid grudgingly. (During that time we were typically about 75% to 100% higher than the “current” hourly rate in the PNW.) In the last 9 months we’ve pushed our rates up over 40% without any push back at all.

    It reminds me of the old days from 1990 to 2002. We were bumping rates about $10/hour every 9 to 12 months. (PC boom to Telecom bust.)

    Things are different now.

    • sufferinsucatash says:

      I remember in 2004, I felt smart because I used some psych tricks to manufacture a raise from $8 to $10 an hour. Could afford a 2 bedroom apartment, small car payment, food, entertainment. Was good times!

      Now about 19 years later, phew you need $70,000 to feel somewhat comfortable.

      • JD says:

        70K to feel comfortable? That’s poverty in most every major city in the country, my friend.

        • Harvey Mushman says:

          Well that’s nice, I’m sure he feels much better now.

        • Sufferinsucatash says:

          Let’s break it down!

          $1500 a month apartment 1 bedroom. 18k

          Car Payment (let’s say a new one, small sedan) $500 a month. 6k

          Car Insurance 2k for a year

          Renters insurance 200 a year

          Food $300 a month 3.6K a year.

          Internet: $99 a month 1.2k a year

          Power: $120 a month 1.4k a year

          let’s say you shop around and water/sewer/trash are all included.

          TV subscriptions/Apps: $60 a month $720 a year.

          Laptop for work: $300 a year (for a nice $1500 one that will last you 5 years)

          You’re young 22-32 years old. You have friends. But yeah you don’t “go out” much to save some money. But do have some low cost hobbies.

          Then just keep trying to get raises as work and build on this base.

          Rough math I’m getting $33.4K on expenses.

          26% state and fed taxes = $18.2k

          So you’re at $18,400 in the black!

          Spend 8,400 how you want and then save 10k.

          It’s not a terrible existence.

        • Not in poverty says:

          I’ve gotten by in a medium sized city on $15 to $20k per year. Roth IRA grown nicely, taxable account increased too though has lost out to inflation.

          Did someone pay you to write that ?

          Or did you just have SF, NYC, LA and maybe a couple other cities in mind ?
          I’m somewhat fortunate in a way, but there are still 1 BR apartments $700 to $1000 in many cities.

          There’s many a poster claiming renters pay $3000 a month to rent. Sure some do. Some pay $5k. Many pay less than $2k.

        • Lots of thrifty Americans says:

          Replying to Sufferinsucatash below (?),

          You’re estimates are reasonable for many people. I come in less on every item except food… about even on food.

          It’s annoying to listen to people talk as if 100k is a difficult salary to live on. I think they’re being annoying on purpose.

  23. Beg4mercy says:

    One of my favorite non mainstream economists, Vincent Deluard, suggests that the social security cola raise last year, along with various federal programs added a trillion in stealth stimulus, something not repeating next year — and he sees inflation echoes going forward. Apparently, inflation rarely just disappears but lingers.

    He sees lots of drag on economy going forward and obviously higher wages don’t fit that narrative, with recession. Real rates heading higher, but, pre election dynamics suggest extreme debt doesn’t matter. Absolutely stupid time to invest in anything, but excellent time to join the herd going over cliff.

    • Imposter says:

      Other than the depression, and a bit just before WWII, it appears that inflation as indicated by the dollar purchasing power, has never subsided let alone disasppeared.

      But, I could be wrong as I often am.

  24. JD says:

    There has never been a better time to make $ if you like to work. There is such a dearth of leadership ability, that you can literally find senior management roles that pay 500K+ in base/bonuses/incentives with 5-7 years of leadership experience at middle manager or better. So many boomers have vacated director, VP, C-suite roles in the last two years that there are opportunities for people like me to double and triple our total compensation right now. I don’t know how long this is going to last, but I’m going to milk it for all it’s worth until the SHTF.

  25. vinyl1 says:

    Monetarists will not worry much about this. If M2 remains constant, and wages go up, then someone else will receive less.

    • rojogrande says:

      The velocity of money plays a role and it has been accelerating from historic lows. The St. Louis Fed has a chart of “Velocity of M2 Money Stock.” More income for workers who are likely to spend the additional income, which this article addresses, may continue to accelerate the velocity of money. Monetarists should be concerned, but we’ll see how this plays out.

      • Ccat says:

        yes, the velocity of money…when I was in college getting my econ degrees, the velocity of money was considered to be nearly a constant. Then technology happened to make it nearly instant and highly variable. I dont think the velocity of money is given enough credit for whats been happening.

    • spencer says:

      Right. But given the wage pressures, the FED will more than accommodate the wage increases, like they did with OPEC in the 70’s.

  26. Sporkfed says:

    I hear higher for longer on interest rates. Basically screwing retirees and lower income workers because inflation will outrun wage gains and meager savings eventually. I know that raising rates faster in the beginning may have “broken” something but maybe, that’s exactly
    what needed to happen ? It seems like the Fed is tolerating inflation rather than fighting it.

  27. Depth Charge says:

    Powell and Co. need to get a spine and slam the brakes on this thing. But they are too scared, trying to protect the most massive everything bubble in human history instead of just popping it and then picking up the pieces. He even said he didn’t want to do it, almost chiding a young college student who asked him.

    The fact of the matter is there is terrible structural damage that has occurred and continues from the most reckless FED in history. The entity charged with stable prices instead destroyed them. And they are still in charge WHY? Heads should have rolled, especially when it was made known that they were day-trading their own policies.

    They should be raising every single meeting from here on out until they absolutely break the back of inflation. There is quite simply WAY too much money still sloshing around, speculating. Even housing caught a bid last fall and has rocketed back in many markets to near all-time highs. They printed way too many trillions, and they have been leveraged.

    • bored ape says:

      The fed the fed the fed. The fed has like 5 incredibly blunt tools to manipulate a dynamic, in fact, chaotic system of a trillion moving parts and hundreds of millions of agents. It’s like stone-age brain surgery.

    • JeffD says:

      Patience. As long as they continue administering QT at the current pace or higher, and FFR rates continue to move slowly higher, even if they soon just remain flat, this will all be over in around two years. The Fed is very slowly destroying the excess currency they created. If they resart QE or lower FFR rates before touchdown though, then inflation will rage higher again.

    • spencer says:

      Yeah, the FED has a lot to mop up. I don’t see how they’ll do it under current controls.

    • gametv says:

      Powell and company dont care about propping up the economy, they care about propping up asset values, because they serve the rich and banking class. Falling asset prices hit the rich, while inflation hits the poor.

  28. JeffD says:

    I think higher rents make people demand more money for wages in this unusual cyle. I think people making more money is secondary as a reason for rent increases right now. Average rent growth has outpaced average wage growth for almost three straight years. The rent to income ratio for wage earners captures that, moving from 26% in 2020 to 30% now. If the wage increases were happening *before* the rent increases, you would not see this jump in the ratio.

    • Depth Charge says:

      Yes, the housing bubble is a MAJOR cause of all of this wage inflation. Local wages don’t pay for shelter, so job openings go unfilled at current wages. Companies are in a bind and so have to either pay increasingly exorbitant wages or just close shop.

      The FED and their MBS purchases royally screwed the entire economy. These deranged lunatics need to sell off their entire portfolio of MBS and send house prices back to where they were in 2011. We need a total reset of house prices to what wages afford, and it would take A LOT of pressure off of wages and everything else.

      • Rent says:

        I’m in Washington state…min wage 15%.

        I think young people have it good here except rents are pretty high. That and not enough apartments though supposedly many built the last 2 or 3 years. Newer apartments, higher rents.

  29. bored ape says:

    Not worrying about productivity gains without matching wage increases only about *aspirations for* wage increases *ostensibly* without matching productivity gains reveals a biased commentator and unsound analyst.

    • Wolf Richter says:


      The first part was the data, then below the charts came the analysis and commentary. You didn’t read that far down. Maybe you just looked at the pictures and felt empowered to dump a pile of crap here?

      Third paragraph from the bottom:

      “One aspect of these inflation drivers is a surge in wages without matching productivity increases. This makes inflation watchers nervous – they’re fretting about another “wage-price spiral.” In the past, wage-price spirals have turned out to be painful and difficult to get under control.”

  30. Thomas Curtis says:

    A wage price spiral and higher for longer inflation certainly seems possible judging from these comments.

    El-Ehrain always mentions that we are in a supply constrained world now rather than a demand constrained one which is inflationary.

    • Einhal says:

      Of course. It’s human nature to want more stuff, both goods and services. So demand is infinite, and supply isn’t.

    • John H. says:

      Thomas Curtis-

      “El-Ehrain always mentions that we are in a supply constrained world now rather than a demand constrained one which is inflationary.”

      Does El-Erian suggest a course of investment to prepare oneself for the supply-constrained realities? Is he suggesting that the commodity cycle has turned upward?

      Past commodity cycles have been profitable, and pretty lengthy… but volatile (…. something about not “going to heck,” or heaven, in a straight line… ).

  31. Thomas Curtis says:

    John H.,

    I have not heard El-Erain mention commodity cycles specifically but certainly as world population rises and we have to dig and drill deeper it does indicate greater demand for more scarce resources. Also, supply chains around the world are separating/rearranging which does reduce supply.

  32. WIZ says:

    So, the manufacturing sector of our economy has been hollowed out in about 50 years by the ‘siren’ song of 10 cents an hour labor – in the 60’s pharmaceuticals left and went to the carribean mostly puerto rico. In the 70’s electronics moved out to puerto rico, Japan and/or Korea – this continues till today. In the 90’s and early 2000’s automotive and aircraft moved to Mexico – this continues till today.

    Does anyone REALLY believe these jobs will come back? Why would a manufacturer pay $50/hour for a local union worker when the same part can be and is being made for $10/hour in Mexico? They wouldn’t.

    So now the emphasis is in the service sector that really cannot be outsourced easily and unions are getting the increases they ask for.

    While we can complain about the profits where do we think the $$ come from for 401k plans, health care programs, retirement, pensions?

    I participated in moving many industries to puerto rico and mexico during the above periods and it was always for lower wages – and NO the quality of the product did not suffer.

    Inflation in services is here to stay…….

    • Thomas Curtis says:

      Absolutely! The lower tech industries aren’t coming back until robotics replaces most labor if then. Mexico followed by Canada were the U.S.’s largest trading partners (not China) in the first 4 months of 2023.

      The U.S. is luring chip manufacturing back with big financial incentives because chips are seen as fundamental to U.S./West security.

      That same chip’s law also funded a lot of basic research which the U.S. leads the world in by a large margin.

    • gametv says:

      the problem is inflation that is caused by government fiscal and monetary policies. we have created massive bubbles in housing, healthcare and financial assets. when you are forced to overpay for living expenses, you need more salary.

      this whole thing is unsustainable and we are reaching the end. as the dollar loses its status as the currency of all trade, our ability to borrow will falter because there will be less demand for dollars.

  33. boikin says:

    I wonder if to some extent part of the increase demand in wages from new hires come from the cost of moving. If you own a home now is not a great time to have to move unless you are getting a big raise.

  34. Swamp Creature says:

    It looks like many companies are having trouble finding technical workers to support their customer base. Example, I just went through 5 technicians with Comcast to fix my Internet and TV connections which failed at pretty much the same time. Each technician came by and left things worse than they were before they came. The techs even failed to even isolate the problems. I wound up troubleshooting most of the problems myself. After the fifth dude finished troubleshooting, he finally left me with a functioning TV and Internet. I thanked him, as he spent over 2 hours in my house. If they want better workers they need to pay them a decent salary.

    • Thomas Curtis says:

      Did Comcast reduce your bill for lost service and aggravation?

      • Swamp Creature says:

        I will be calling them about this issue. I lost about 40 hours of work.

    • NBay says:

      Pretty sure they are ill trained contact workers….on call, too. But the guy told me that several years ago when I accidentally badmouthed Comcast, apologized, and he said don’t worry about it, and told me.

  35. gametv says:

    This article directly conflicts an article on Wall Street Journal that shows employers are offering less for new employees. The difference is that this is wage expectations and the WSJ article is the actual offered salaries, which is forward-looking.

    Give it another couple months and the salary surge will be long gone.

    • gametv says:

      to clarify, the WSJ article is based on job postings, so it is even more forward looking that actual salary offers.

      • Nunya says:


        It’s very hard to day to decipher if websites/sources, even “respectable” ones like the WSJ, are feeding you clickbait, propaganda, paid pieces, recycled content, etc. It’s a shame because it’s no longer about reporting facts, it’s all about the money.

        There are clues in most articles, but it takes a different approach to read them with intent, especially reading between the lines. Then there is the aspect of fact checking some of these pieces, which most of the times ends up in a realization that they cherry picked and extrapolated the data. Above all, they sometimes then take the bastardized data, and then infer conclusions from it as opposed to presenting a case based on critical reasoning.

        To Wolf’s credit, he presents you with current data, historical data, patterns, previous events, and then lastly provides his opinion. To my knowledge, his opinion is clearly stated as an opinion. We can then of course take the data and arrive at our opinions.

    • Wolf Richter says:

      That WSJ article was BS based on job listings on ZipRecruiter, which are very self-selective and represent only a small portion of all job openings. Not a random sample at all. That’s the most BS-data anyone can dig up. And they didn’t even dig it up. It came to them.

      ZipRecruiter likely went to a WSJ reporter with this stuff to get its name in the WSJ in order to pump up its stock price, which has been languishing: direct listing in March 2021, first trade at $20, today at $16.

      I brutalized the WSJ publicly several times already for the BS they’re occasionally printing, and I was tempted to do so today.

  36. JimL says:

    I think the longer inflation stays in wages (and not goods) the softer the landing.

    Eventually all inflation makes its way from wages to goods (people who make more want more stuff), but there are three things working against inflation quickly making its way from wages to goods:

    1. Boomers. Boomers are retiring/getting old. They are at the stage of their lives where they are not collecting more stuff. They are definitely spending more of services, but they are not regularly buying new cars, new TVs, more furniture, etc. They will continue to feed service inflation while holding down goods inflation.

    2. Millennials. The culture among Millennials is different than previous generations. They are more about life experiences (travel, concerts, etc.) than collecting lots and lots of stuff. How much this continues will be interesting to see. Is it a true cultural change or did they chase life experiences because the cost of goods was out of their price range. Now that their wages are increasing relative to the cost of goods will they start chasing goods since they can afford them? If this is truly a cultural change it will be the biggest driver of keeping inflation in wages (services) than goods. If it isn’t, it will quickly disappear.

    3. Corporate margins. Corporate margins have risen to crazy historically high levels the past few decades. Lots of various reasons, but the point is, wage inflation is going to put pressure on those margins. That margins are so high means that there is a whole lot of room for margins to shrink before corporations are forced to raise prices.

    I think wage inflation is going to be around for a while before it starts to drastically affect goods inflation. That makes for a nice soft landing for workers.

  37. Crack maybe ? says:

    Okay thankfully I don’t have to listen to commentators here inject “tipping point” or “inflection point” in their discussions. For some reason not used here.
    But it does seem cool to throw out th
    e phrase “something will break” here.

    Break ? When Nasdaq lost 79% of its value… did it break ? When housing values dropped 23 to 27% (depending on the source I read) peak to trough… did they break ?
    Do the people who use this phrase have something specific in mind ?
    To me it just sounds a bit lame, a bit sensational.

    And by the way, most people who use “inflection point” are talking about when the first derivative of a graph changes signs (e.g., positive to negative or vice-versa). That’s wrong (in the math world anyhow)… its when the second derivative changes signs (the first having gone to 0 and resuming its positive or negative stance).
    It does NOT bother me that it gets misused…everyone thinks they know what the speaker means so it’s ok.
    If we all understand “no” really means “yes”, someone can say “no” inappropriately and it will not be criticized.

    • fullbellyemptymind says:

      Thank you for being the one to take a stand Re: 1st and 2nd derivatives. That’s third on my list after “ATM machine” and “VIN number”. And if your screen name is indeed a question, then by all means yes to crack. You’re gonna love it, but make your own (very easy, just google it), they’re putting fent in everything these days.

      Lastly – and more on topic – many, many, many things broke as a result of the disruptions you cite. If you’ve managed to remain unaware of that I can only reiterate my crack recommendation.

  38. hreardon says:

    Can confirm:

    I’m hiring for 5 positions in IT services, 3 entry level, 1 administrative support, 1 high end problem solver/engineer.

    Coming straight out of college with zero experience the kiddos are demanding $65k.

    At the top end they won’t even talk unless starting at $100k.

    We’re also facing 6-8% raises for our staff in the next month or two; This is on top of 8% last year and the year prior. We’re definitely feeling the pinch on wages; The only thing allowing us to keep us is our ability to continue raising rates on our clients, thankfully (or not…?).

    In terms of productivity: this has become a major hurdle in the last two years for our staff between 22 – 40. We know we’re over-paying to retain talent, and definitely getting less productivity in return.

    Completely different mindset for our staff 40+ – they simply do what is necessary to “get the job done”, and we compensate handsomely (and gladly) for that.

    In a staff review yesterday we informed one of our recent hires “we’d be more than happy to pay you an additional $2,500/mo. in return for x, y, z productivity – I’d rather pay you than hire someone else.” The response was, “yeah, thanks, but I really enjoy the balance I have.”

    Surprising, but not surprising in 2023.

  39. Housing Investors says:

    Why don’t the commentators here ever complain about investors buying huge amounts of housing the last decade ?
    They (commentators) complain
    ennndddlessly about ZIRP yet hardly a peep about investors buying 33% of the homes in Atlanta, 42% in Dallas County, 52% in Tarrant County in 2021.

    Are you all rich ? I dont think so but possibly.
    Are you all libertarians ?

    At other media outlets (?) there can be a considerable number of people who vociferously complain about investors buying up so MUCH housing in the last 10 years especially last 3.
    They bought 5% of the homes sold in 2000 per Washington Post), up to approximately 20% in 2021 nationwide.

    I actually wish they complained less about the investors and more about the politicians who seemed to not care one little bit. I think I understand why… homeowners ratio to renters is 2:1. Coupled with homeowners probably more likely to vote than a renter and quite possibly there is the answer.

    • Wolf Richter says:

      Renting is a choice consumers have and want to have. Many renters are renters of choice, paying lots of money to live in a nice place in a city center (apartment) or in the suburbs (house) and not have to worry about the issues coming with property ownership. Most of the rental units built over the past 10 years are higher-end for renters of choice. That’s where the money is. So you need to have big landlords to own this stuff.

      Big landlords are the only ones with enough heft to own apartment towers. So that’s a given. In terms of single-family houses, the big thing these days is “build to rent,” where entire developments are built with rental houses, and the home builder rents them out, and then sells the entire development to a big fund, such as Blackstone.

      Over the past few years, the big landlords bought large portfolios of rental houses from other big landlords, and they bought entire build-to-rent developments from home builders, but what they did NOT do was buy individual houses spread across the country. They did that in 2011-2014 after prices had collapsed. And that’s when it largely ended.

      There has been a huge amount of braindead BS in the blogosphere, the social media, and elsewhere about big landlords buying up “whole neighborhoods,” or some such BS, which I repeatedly demolished, for example here. So read this:


  40. TJ says:

    I work as a special delivery driver transporting time sensitive goods. I work all by contract and have my own truck for years now. I was able to demand a 35% increase just last month but to be honest and straightforward I have not asked for an increase in my rates since 2021 or about 3 years so it is catch up time.

  41. Slickfish says:

    This article generated many interesting comments. I can add to the drum beat that wages from my Federal Union Job where membership is voluntary have fallen miserably behind inflation over the last two years. Pilots in the same industry are securing 25% wage increases while we have gotten 6% in TWO years. I doubt many employers are in as bad of shape financially as mine, so I don’t expect much going forward and it would be a miracle if they can keep their pension promises. I can also tell you that I saw that writing on the wall 20 years ago and started investing in single family homes. I have increased rent on our homes by an average of 30% in two years here in the rust belt of the Midwest. Why? Just like wolf said, because I can. I cring at the asking rent and qualified people are beating down the doors. Supply and demand. And my wife spends the extra 2,000 per month just to maintain the standard of living we had three years ago. But how can this continue? If interest rates drop without a home price correction I wonder what that will do to housing costs.

    • NBay says:

      Yeah, All the human suffering in these comments is really bothering me…..I may lose sleep.


  42. bored ape says:

    Wolf, can one break down and quantify the effect of rate hikes on inflation via tighter credit for business and thus pinching growth and ultimately hurting labor versus via lower import prices thanks to a stronger dollar? Wouldn’t the latter be a bigger and more immediate factor in lowering inflation than the former in an economy so dependent on imports? Granted, you have been writing endlessly about service sector inflation, which is domestic and should correlate with wages, but goods and imports are still a major factor, no? Of course, all this assumes that rate hikes do strengthen the dollar, which may be principally a valid assumption not fully or directly borne out in practice due to other factors.

    • Wolf Richter says:

      In terms of the dollar and imports: that refers to goods, and the strong dollar has helped bring down inflation in goods. Inflation in most goods has nearly vanished.

      But nearly all of the inflation is now in services, and they’re not imported, and they’re about 68% of the economy.

      “…can one break down and quantify the effect of rate hikes on inflation via tighter credit for business…”

      When it comes to inflation, almost nothing can be “pinned down” with any certainty, not even the rate of inflation itself. There are lots of inflation measures, and we cover some of them here, and they’re different. And every business and consumer have their own inflation rates, depending on where they are and what they do.

      And the effects of tightening cannot be pinned down either – hence all the surprises along the way, such as this year, when the economy started re-accelerating again in Q1 and Q2 and in Q3 so far has been running way too hot.

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