What Do We Do About the ‘Ruinous’ Inflation?
Earlier this week, ADP released its latest national employment report which couldn’t compete with the Russian invasion of Ukraine. But the report is worth discussing, if only because it delivers a picture of the U.S. economy today that is completely different from what the political pundits on both sides are saying about our so-called economic woes.
For the GOP, of course, the economy has never been in such bad shape. Ruinous inflation out of control, nothing to buy in the stores, a complete collapse of the supply chain, blah, blah, and blah.
The Democrats are no better when all is said and done. They believe that the low unemployment numbers mask the fact that many people have dropped out of the job market altogether, so they are no longer counted as being unemployed.
The ADP report puts all this nonsense to rest and needs to be read in its entirety, not just with a quick glance. You can download the report here.
What the report shows is that private-sector employment increased by 475,000 from January to February, which was twice the number expected to have occurred. The jobs increase was most pronounced in companies of a thousand employees or more, which usually also pay the highest hourly wage.
This increase compensated for the fact that small businesses, defined as companies with less than 20 employees, lost 95,000 jobs in January. Except the reason that this job sector declined was — ready? — reduced labor supply: “Small companies lost ground as they continue to struggle to keep pace with the wages and benefits needed to attract a limited pool of qualified workers.”
The company which owns a chain of convenience stores near me has been trying to hire drivers to deliver fuel from the wholesale depot to their individual stores. To qualify for one of these jobs, you need a commercial driver’s license (CDL), a clean background and pass a drug test. A high school diploma is not on the list.
In an area where a new, two-bedroom apartment with off-street parking, good schools, and available Wi-Fi connection rents for $1,000 a month, the company is offering $96,000 to start plus all the usual bennies and thousand-dollar sign-on bonus as well.
Know why this company can’t get help? Because the economy is so strong that it has outstripped the size of the labor pool which provides the workers who perform the tasks necessary to move consumer products from the containers to the warehouses to the trucks which then drop off everything that people want to buy at the local store.
Right now, the American Trucking Association estimates that more than 80,000 truckdrivers are needed to meet the current demands of the retail supply chain. When Joe ordered container ports in California to move to 24/7 schedules, it didn’t happen because there weren’t enough truckers available to pull the containers off the docks.
From the way the media is talking, you would think that the current spike in inflation is as bad as what happened in Germany after World War I. This morning, I paid $3.50 per gallon at the convenience store. My car gets 30 miles to the gallon today. Four years ago, when gasoline at the pump was running about $2.50 a gallon, the same car model I now own was rated at 21 mpg. So, the mpg has gone up by 40 percent and the per-gallon cost to drive my car has also gone up by 40 percent. That’s some out-of-control, ruinous inflation, right?
One more point about gasoline prices given that just about everyone checks this price at least once a week. The annual average per-gallon price for gasoline in 2020 was $2.18, a drop from the average price in 2019 which was $2.60. What accounted for the 2020 price decline? The fact that so many people worked from home rather than commuting to work in their cars.
Guess what? As the Covid-19 infection rate goes down, the number of people driving to work every day goes up. Combine that trend with the guy getting paid a hundred grand plus bennies to deliver gasoline to the store where I fill up and what I paid this morning for gasoline isn’t all that much.
I don’t care what alt-right noisemakers say about inflation or anything else. But I would like to see one pundit from our side explain today’s inflation as a reflection of a labor shortage created by sky-high demand and not some nonsense about how the economy is ‘out of control.’
Am I asking too much from the Fake News?