Labor Shortage Under #1 Becomes Labor Bottleneck Under #2

It isn’t quite rise to the level of the LABOR SHORTAGE!!!! fiasco, but it’s moving up toward that territory. This, of course, had been during Inflation Hysteria #1 when at its absolute peak the unemployment rate was being used to justify expectations for not just a little more in consumer prices but a lot more. In 2018, in particular, there were widespread anecdotes, hardly a day would pass without some mainstream media story about how companies were struggling to cope finding enough workers.

The idea then was as simple as it was pleasing to Jay Powell and those like him who’d spent years waiting on just this sort of confirmation for monetary policy in QE form. Had it been happening that way, this would’ve meant officials hadn’t screwed up as badly as it appeared (certainly from the bond market perspective). A bout and burst of inflation would’ve signaled how macro slack had indeed been fully used up and whatever shape the economy was in at the time equaled full recovery regardless.

Never much more than anecdotes, however, the data on the side of the hysteria consisted of the unemployment rate and then the Job Openings portion of the JOLTS survey. That was it. Neither was corroborated by anything else, in particular bonds yields and their curves, let alone other sources for wages or prices – thus hysteria.

Nowadays, sunk deep in recession, a recession that has easily bested and outlasted the original “V” expectations, there can’t be a labor shortage, can there? With so many people out of work, more during December 2020 than even the worst month of the Great “Recession” (not to mention the nearly 10 million others who while still employed also experienced some disruption in hours or work), are we to believe the labor market might still contribute to this budding second hysteria over inflation?

Yep:

The deliveries struggled due to issues surrounding transportation, labor availability and uncertainty about the future holding back increased investments, according to ISM Manufacturing Business Survey Committee Chair Timothy Fiore said. [emphasis added]

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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