According to the Australian Bureau of Statistics, 27% of businesses are finding it difficult to find staff, mainly in sectors such as hospitality, sales, engineering, transport, and building.
The main reason is, well…no one is applying for the jobs.
It’s something I’ve already heard often in the occasional chat with restaurant owners. That is, how hard it is to find staff, and I’ve even heard of people getting offered incentives like bonuses to start work.
And, of course, it’s hard to miss all the ‘staff wanted’ signs on shop windows.
Still, this isn’t really showing up in wage data…yet.
Wages increased 0.4% over the June quarter and 1.7% for the year.
I wasn’t the only one surprised at these numbers. As the Australian Financial Review reported:
‘The low figure surprised economists given widespread reports over the three months to June 30 of labour shortages in parts of the economy leading to significant upward pressure on take home pay.’
We may see some signs of this in the next release.
But while it’s not very clear what’s going on, it’s not just Australia.
Here’s a recent headline from Fortune: ‘American workers now have the upper hand as employers rush to raise hourly wages’.
The article describes how employers are resorting to pushing hourly wages higher, giving hiring bonuses and even going as far as poaching workers from competitors to get employees.
As they write (emphasis added):
‘It is unclear how long all of this will last in the wild and disjointed economic recovery that’s followed last year’s pandemic collapse. But one thing is certain: Workers are scoring the fattest pay hikes since the early 1980s. Wages for the leisure and hospitality industry have surged at an annualized pace of 6.6% over the past two years. And data released Friday showed that payrolls rose nationally at the fastest pace in almost a year, a sign of how desperate employers are to fill jobs.
‘The subject came up at a recent meeting with Treasury Secretary Janet Yellen in Atlanta, where she gathered senior leaders from companies including Delta Air Lines Inc. and Coca-Cola Co. to talk about inflation and the economy. During private discussions, some executives bemoaned the fact they still can’t fill open positions even after wages were increased, according to a person familiar with the conversation. The consensus among employers was that higher pay is here to stay.’
We’ve already seen inflation in asset prices for years. There’s now upward pressure in wages and in consumer prices, mainly because of supply chain disruptions in things like semi-conductors, timber, cars, and shipping.
Consumer prices in the US increased by 5.4% in June for the year, the largest jump since August 2008. In Australia, consumer prices increased by 3.8%.
The main question of course, is that if this is transitory. It’s not really looking that way, especially if we start to see wage inflation.
But take shipping, for example, it’s run into a lot of problems lately. A few months ago, a shipping container blocked the Suez Canal.
And, more recently, China partly closed operation at Ningbo-Zhoushan port, the third-busiest container port in the world, after a COVID outbreak.
All these disruptions and port congestions have meant higher costs and could continue as we head into the busy Christmas period.
As the Financial Times reports, the cost of moving a 40-foot ship container from China to the US’ west coast is now US$15,800, a 10-fold jump from before the pandemic.
As they wrote:
‘Beyond the most affected sectors, such as automotive and textiles, increasing numbers of companies report they are having difficulty in meeting demand and battling pressures to raise prices. In Europe, these effects can already be seen in weak industrial production over the summer.’
US inflation expectations for this year and next year keep moving higher. At least, that’s according to Bloomberg’s latest monthly survey of economists, as you can see below:
So maybe not so temporary after all.
Of course, the big wild card here is the Delta variant, which is already causing lockdowns.
But so far, it’s looking like inflation — higher than the US Fed’s target of 2% — is here to stay for a while now. At the same time, savings rates are paying peanuts.
Inflation acts like a tax. It will have an effect on growth and erode buying power.
In a scenario like this, things like gold tend to do well.
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