US Economic Highlights
The US is currently experiencing an unusual round of inflation. We haven’t seen much of this villain since the mid 1980s. Retail prices started rising in April from 2.7 percent and are now running at 5.4 percent annually. Why?
The short answer is pent up demand, rising oil prices, the pandemic, and “supply chain” issues. They have all been rising or festering for the past year. We still rely on gasoline, diesel, and aviation fuels for our transportation needs. Also, the entire plastics industry relies on oil in the manufacture of its products. Rising transportation costs affect every business and every person in the land, Nothing permeates and upsets our daily lives like rising oil prices and their related products.
Fuels are “demand inelastic,” meaning that we need to transport our (overweight) selves around even when prices are rising. Prices can also be manipulated upward by curtailing oil production. OPEC knows this page of their oil book by heart and they have calibrated their production to assure higher and higher prices as long as we are willing to pay the price. And even though the US is no longer as reliant on OPEC as we were in the past 50 or 60 years, there is still basically one world price of crude, and we are paying it. Those with electric and hybrid cars are the smart consumers. The rest of us are chumps.
About Demand. Many more of us are flush with cash as a result of the pandemic. “Demand pull” inflation happens when too much cash is chasing too few products. But the lingering effects of the pandemic is leaving gaps in the “supply chain” of smaller products that come to us from around the world and that feed into the manufacture of more complex products like computers and automobiles. Every day more and more shelves are becoming empty in more and more stores simply because of gaps in the supply chain that are slow in getting fixed or filled.
Seaport Congestion. At the same time, hundreds of container cargo ships loaded with products are anchored offshore on both our coasts because they cannot be offloaded fast enough to fill our trucks and railroad cars to take them to our distribution centers and retail outlets. This is a transportation problem that stems from the pandemic that has left us with a shortage of truck drivers and dock workers. At the same time consumer demand for goods is up 22 percent to pre-pandemic levels.
The Pandemic. At this writing 192 million US residents have been vaccinated against the corona virus. With the addition of 5 to 11 year-olds into the mix of the vaccinated, another 30 million or so will be added to our vaccinated total and to a needed bit of humanity to us and to them. Hallelujah!
Action by the Fed. The Fed has been injecting money into the banking system at the rate of $220 billion per month since the start of the pandemic. They are now “tapering” that flow by $15 billion per month, and they will continue to taper until late in 2022 on the expectation that the pandemic, economic growth, employment, and inflation will stabilize by then. They are usually correct in their assessments.
What about Rising Wages? This is a bunk argument. Some increased wages are justified when jobs are not being filled quickly enough. That is an artifact of the pandemic. US workers are still underpaid by every measure of reckoning. Approximately 54 percent of US families are living with less than a Fair Living wage as determined by the MIT study of this subject. On the other hand, both income and wealth inequalities between rich and poor are wider today than at any time in our history. CEO pay is 475 times as great as that of workers, and the ultra wealthy have been are sucking up 70 percent of the Fed’s money injections since March 2021, while watching their wealth accounts mount to the sky. US wealth is now at a record high of $137 trillion with the wealthiest 10 percent holding $124 trillion of that total. The pillaging and plundering continue.
Predictions for 2022. US Trading Economics predicts that US consumer prices will fall to 3.2 percent by the first quarter of 2022, and will average 2.6 percent growth rate for all of 2022. My AI forecasting source predicts 4.48 percent by January 2022, and 1.18 percent by December 2022.
The Fed predicts US unemployment to average between 3.8 and 4.0 percent for all of 2022, while AI Forecasting predicts 4.4 percent at the start of 2022, and 3.8 percent by December 2022.
Summary. It appears that most of the economic news today and predicted for 2022 is a return to pre-pandemic levels, owing to a recovering economy and to a semblance of normality in our health outlook. How data will likely become distorted, jimmied, jammed, and turned into an oozing ball of simmering, seething scatological refuse from our disjointed band of ragtag politicians is better left to others to make predictions about. I am out of here.
US CEO to worker wage ratios.
