The global economy is out of whack and governments aren’t sure what to do.
The evidence is in a daily churn of headlines that lend themselves to alarming pronouncements.
On Wednesday, the government’s Consumer Price Index confirmed what anybody who has been to the grocery store already knew: US prices are up.
“Rising prices for food and shelter contributed more than half of this increase, while prices for new cars, household furnishings and car insurance also climbed,”
writes CNN’s Anneken Tappe, adding that new car prices had their biggest one-year jump since 1980. The price of gas is up more than 40% in a year.
The roughly 70 million US Social Security recipients will get their largest cost of living adjustment since 1982, the government announced Wednesday — a $92 per month boost next year to an estimated average of $1,657 to help cover the rising costs.
Not everything is more expensive. Plane tickets have dipped a bit.
But everyday costs like rents are rising. Home prices are expected to continue to go up, according to Goldman Sachs. The investment bank projects more and more people will be forced out of the home market by high prices only to be pressured by high rents.
What’s the fix for high home prices? Perhaps relaxed zoning laws. Goldman Sachs noted that California has abolished single-family zoning in the state, which could add housing units.
Read more on housing from CNN’s Anna Bahney.
Workers are quitting their jobs
A record number of Americans — 4.3 million workers, or nearly 3% of the total workforce — quit their jobs in August. That’s the highest quit rate in the history of the government survey that tracks the data, which has been around since 2000.
CNN’s Matt Egan writes that workers want higher pay, better conditions and more flexibility. And companies are so desperate for workers that people aren’t worried about seeing what else is available.
This is not the sappy hyperdrama of disillusioned hard workers all giving up and moving away that Ayn Rand wrote about in “Atlas Shrugged.”
It’s a problem for companies grappling with a worker shortage.
But it’s also a potential
“golden age” for American workers, writes Egan. He talked to Joe Brusuelas, the chief economist at the consulting firm RSM, who said we’re in the midst of a pivotal moment as the US and the rest of the world overcome Covid-19.
“This is what happens after great wars or depressions,” Brusuelas said. “It’s hard to spot while you’re in it, but we’ve gone through a shock that has elicited an unexpected change upon the population. And it will take some time to sort through.”
“People are making different decisions, they’ve moved to different places,” JPMorgan Chase CEO Jamie Dimon said Wednesday. “Covid has affected their mindset. There’s more churn. That’s OK and that will normalize over time,” Dimon said.
But it’s not all tales of worker empowerment. And it’s not just American workers that matter to the US economy. Read
this report on an open letter from transportation industry groups calling for more freedom of movement in the world for transportation workers and access to Covid-19 vaccines to avoid a transportation industry collapse.
We’ve all seen photos of container ships in lines. The story describes seafarers on cargo ships who haven’t been allowed to go on shore in 18 months. It also outlines how a truck driver shortage in Europe has been complicated by mandatory Covid-19 testing in some countries there.
The supply chain is not unclogging
In an effort to clear those container ships crowded off US shores,
President Joe Biden announced Wednesday that certain US ports would operate 24/7 to begin to alleviate supply chain issues. That won’t fix the capacity problems at US ports and on interior transportation routes. Meanwhile, the bill to increase infrastructure spending can’t quite get over the finish line on Capitol Hill.
Separately, the US will slowly end some restrictions at US borders and
allow fully vaccinated travelers into the country.
So much of the preceding elements — the worker shortage and inflation — are also tied to the supply chain.
The International Monetary Fund on Tuesday downgraded its growth forecast for the US, citing the supply chain. Egan writes about a Moody’s report suggesting the supply chain will impede the economy’s recovery. Other analysts are not as worried and think companies will adjust and the supply chain will eventually begin working again.
The energy crisis is real
Energy problems are more focused in Europe, where the price of natural gas is through the roof, and in China, where it’s the increasing expense of coal. There’s a spillover that has US gas prices at a seven-year high.
A spike in fossil fuel prices should be just the right thing to convince more people that now is the time to transition toward greener and renewable energy sources needed to combat climate change — but the Democrats’ proposals to do just that are looking less and less likely in Washington. The real-world effect of
higher fossil fuel prices could be to hit people and businesses in the wallet and drive inflation even higher.
Bottom line: “I think it’s about how all of this shows just how big of a shock Covid delivered to the whole planet,” said Egan. “Entire systems that we all used to take for granted, like a supply chain that works behind the scenes to get goods from factories to our front doorsteps, have broken down. Our assumption that there are always enough workers to drive trucks and work at ports have been thrown into disarray. And while the pandemic happened quickly, there is no reason to think these problems will go away overnight. It’s going to take time to sort through them all.”
In-depth: Which workers are quitting and why?
Which workers are quitting, exactly?
I asked CNN’s Tami Luhby what we know about who is quitting and why. Here’s what she said:
More than half of that jump came from the lodging and food services sector, which saw 157,000 people leave … These jobs tend to be lower wage so some workers may be lured away by the signing bonuses, pay increases and other incentives that businesses are offering to fill their openings.
Also, 26,000 people in the wholesale trade sector, which includes truck drivers and sales representatives, quit their jobs, as did 25,000 people in local government education.
The number of quits increased in the South and Midwest.
But a couple of sectors saw reductions in the number and rates of people quitting. Fewer workers in the real estate/rental/leasing sector said goodbye to their jobs, for instance. Quits fell by 23,000.
Are unemployment benefits to blame? And is it still possible to argue, as many Republican governors and business owners previously did, that expanded unemployment benefits — which have now expired — are to blame for the worker shortage?
Luhby: It’s becoming increasingly clear that the end of pandemic unemployment benefits is not prompting the jobless to rush back to work. The labor force shrank last month for the first time since May, signaling that more people were opting to sit on the sidelines and not actively look for jobs.
Also, employment did not grow substantially faster in the two dozen states (all but one led by Republicans) that opted to terminate benefits in June or July, previous studies and government data have found.
The enhanced unemployment benefits may have had a small negative impact on people’s interest in looking for work, but other factors — including child care issues, virus fears and workers’ reevaluation of their life goals — played a major role.
That said, experts caution against drawing firm conclusions on just one or two months of data.
The jobless typically have to apply to positions on a regular basis to qualify for unemployment payments, so ending the benefits may prompt some to stop looking, at least temporarily. And others may be searching for new employment, but it takes time to find the right match.
