A couple of days ago, I walked to my usual café for an afternoon cup of coffee only to find it closed.
There was a note stuck on the door. It began:
‘Like so many of our hospitality friends across Australia, we are also experiencing the challenges of being short staffed…’
Long story short, the café’s owners have had no choice but to reduce their opening hours until they find more chefs and front-of-house staff.
We’ve been suffering from a worker shortage for a while now.
I mean, it’s hard to miss all the ‘help wanted’ signs on restaurant, shop, and bar windows.
And it’s something that Seek — one of Australia’s largest job search engines — confirmed this week, too.
In October, the company saw the highest number of jobs posted in a month in over 23 years. National job ads increased by 63.2% compared to October 2020, and 44% when compared to October in 2019.
Seek’s managing director Kendra Banks said:
‘In October, Seek had more jobs ads on-site than ever before. A combination of the lifting of restrictions in our two largest employment markets — New South Wales and Victoria — along with businesses getting ready for what will hopefully be a bumper holiday period, has had a huge impact on this month’s job ad volumes.’
Hospitality and tourism jobs were the industries with the most ads on the site, and the spike in hiring was the largest in Victoria, NSW, and the ACT.
Word on the street is that chefs and waiting staff in particular are getting offered signing bonuses and higher salaries to take on jobs.
Job ads may be at record highs, but according to Seek, there aren’t too many takers for each job. Not surprising, considering that international borders have only just opened, there aren’t too many students or temporary workers around, and Australia’s population has been shrinking.
A friend in the industry recently told me that he posted an ad looking for a kitchen hand. In the past he would have gotten dozens of responses but this time he got only one…and the candidate’s pay expectations were close to double those of what the job paid.
It’s only a matter of time before these higher costs of doing business are passed on to consumers. In fact, I’ve already noticed prices creeping up in some café and restaurant menus.
The Reserve Bank of Australia (RBA) doesn’t seem too worried.
In their recent Statement on Monetary Policy, they said they expect wages to pick up ‘gradually’.
Instead of offering higher wages, they said that companies are trying to attract workers through other means such as signing and retention bonuses, offering more flexibility and training.
They expect wage growth to get to pre-pandemic levels of around 2–2.5% by the end of 2021 and then hit around 3% by the end of 2023, the fastest pace since 2013.
In regards to inflation, it came higher than expected in the September quarter mainly from higher petrol prices and building costs.
Underlying inflation came in at 2.1% over the year, and the RBA is forecasting underlying inflation to be at around 2.25% through 2022 and to increase by 2.5% by the end of 2023.
This is quite an increase from August expectations, when the RBA forecasted underlying inflation would be 1.75% through 2022 and wouldn’t reach 2% until 2023.
Over on the other side of the Pacific Ocean, inflation has also surprised on the upside. The US Consumer Price Index increased 0.9% in October and 6.2% over the last 12 months, the highest since 1990.
The increases came in on almost everything (energy, food, vehicles, and shelter), with Biden now recognising that reversing this inflation trend is a ‘top priority’ .
So while you may still be hearing that this is temporary, it certainly doesn’t look it.
What’s clear is that it’s getting more expensive to do business with restrictions and lockdowns, staff shortages, supply chain disruptions, and restarting and stopping the economy. It’s affecting food prices, commodities, housing, shipping, and energy.
But there’s also a lot of money in the system, which is driving demand higher.
This record demand is even pushing Chinese producers to increase prices. Here’s Bloomberg:
‘For years, China’s factories have acted as a brake on global inflation as they cut costs to keep foreign customers amid sluggish demand and competition from up-and-coming manufacturing rivals like Vietnam. But China’s export boom since the pandemic has changed all that, giving manufacturers confidence to ask foreign customers for more.
‘A global rush for raw materials means Chinese factories are facing the fastest rise in input prices in almost 26 years, and Beijing has said factories could face a 20% hike in their electricity costs due to a power crunch.’
It doesn’t look like this trend is reversing anytime soon.
As I’ve written before, rising inflation puts central banks in a tough spot.
With so much wealth stuck in assets, raising interest rates could really cause asset prices to drop, hitting the wealth effect and consumption.
It’s why, in my view, I don’t expect they’ll be in a rush to raise rates too quickly…that is, unless inflation really gets out of hand. But we could be looking at negative real interest rates for a while.
Meanwhile, gold prices have been picking up this week…
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