Image source: Scott Baker / Unsplash
In September, the US economy added 194,000 jobs, far below consensus analyst expectations of 500,000 jobs. The unemployment rate moved lower to 4.8% from 5.2% in August. Ironically, there are plenty of jobs available for workers, but companies across all sectors report challenging conditions for attracting workers.
The pandemic’s impact continues in the labor force
- Demand for workers is rising as economies reopen.
- Many workers are leaving the workforce. The “quits scale” rose to 4.3 million in August, a record high.
- The sectors most affected have been accommodation and food services, wholesale trade, and state and local government education.
It’s not just a US issue
- Employment shortages are not limited to the US.
- Brexit has exacerbated the UK labor force shortages as foreign workers have departed.
- Furlough schemes in the Eurozone have caused many workers to exit the labor market.
Impacting the supply chain
- The lack of sufficient workers affects the global supply chain with rising prices and demand for goods.
- The employment shortage has led to shorter hours and doing more with fewer employees for many retail and service businesses.
- A truck driver shortage increases the time for companies to bring their goods to markets.
Lots of job vacancies but filling them is a challenge
- There were 10.4 million unfilled job openings in August.
- Aging and retiring workers are not returning to the workforce in the aftermath of the pandemic.
- Border controls and immigration limits curtail the number of available workers.
- Demands for higher pay and flexible working arrangements are limiting the number of workers.
- Government subsidies and stimulus disbursements made staying home the same as working for lower-paid workers during the pandemic.
Wages will need to rise – More inflationary pressures
- Inflation has been increasing. The latest September CPI data rose 0.4%, pushing the year-over-year gain to 5.4%.
- Energy prices are soaring. Energy is a critical cost of goods sold input for all businesses.
- Rising wages will put upward pressure on inflation as companies pass along increased costs to consumers.
- Inflationary pressures will eventually lead to higher interest rates. Rising wages will weigh on corporate earnings.
The dilemma’s bottom line
- We could begin to see earnings pressure in the retail and restaurant sectors.
- Workers need to earn more to pay for essentials as inflation continues to rise.
- Inflation can become a vicious circle. Rising prices are the same as deteriorating currency values. The labor market shortage is another reason why inflationary pressure may not be all that “transitory.”
- Last weekend, Square’s (SQ) Jack Dorsey warned of impending hyperinflation, saying, “It will happen in the US soon, and so the world.”
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Equities News Contributor: Tradier Inc
Source: Equities News