“the changes are a significant step backward. Biden is effectively undoing a major change made by the Reagan administration—changes that were made, fittingly, to help combat inflation.
That change, made in 1982, repealed the “30 percent rule” that guided the process for determining what wages would be paid on which projects. Under the 30 percent rule, the prevailing wage for any particular area would be based on the highest wages paid to at least 30 percent of workers within the same area.
You don’t need an advanced degree in accounting to see how that mandate could artificially hike wages on federal projects. The government barred itself from even considering bids that might pay average wages, thereby obligating taxpayers to pay more than they might have had to in an open market.”
“wages aren’t as fluid as, say, gas prices, which seem to jump up or down in an instant. There are reasons for this. Gas prices are easily observed and easily changed, and people will happily switch stations to save a few cents per gallon. Labor markets aren’t like this at all. Switching jobs takes time and effort, and many workers are reluctant to give up the devil they know for the devil they don’t. Employers capitalize on this situation by adjusting wages slowly, if at all.”
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“High inflation, combined with slow wage adjustment, drives purchasing power down. And this is true not just for the US. Canada’s post-Covid pay has followed the same trajectory as ours, and it is not alone.”
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“To climb out of this hole, real wages will have to start growing again. The good news is that they already have. Annual real wage changes turned positive in February; month-on-month changes turned positive late last year. In this respect, we are doing well. Most European economies still haven’t seen real wage growth.
Furthermore, this hole is shallower than it may seem. Since late 2020, real wage reductions have cost households a little less than $1 trillion. That is a lot, without a doubt, but it is less than half of what households received in Covid-related transfers — stimulus payments, expanded unemployment insurance, child care credits, and the like — which amounted to $2 trillion. That puts them well ahead of where they were in March 2020, which is why people report that their own finances are doing just fine, even while they trash the state of the economy.”
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“What we need to free ourselves from is the preconception that low unemployment alone makes a good labor market. Where we actually are is simple to understand. Dollar wages adjust slowly to price increases. Inflation has raised prices a lot, reducing purchasing power. As a result, the public is not happy about the economy.”
“An avian flu outbreak devastated the poultry industry throughout 2022. By the end of the year, according to the U.S. Department of Agriculture (USDA), there were 43 million fewer egg-laying hens than in February 2022. Egg inventories fell 29 percent from January to December. When demand outstrips supply, prices go up.
A similar outbreak in late 2014 affected more than 50 million birds. According to Fed data, egg prices rose from $1.96 a dozen in May 2015 to $2.96 in September 2015 before falling for more than a year afterward.
The 2022 outbreak, by contrast, persisted into 2023. At the same time, general inflation was unusually high: 6.5 percent in 2022, compared to 0.7 percent in 2015. “Like consumers,” the American Feed Industry Association noted in January 2023, “feed manufacturers are feeling the effects of inflation on the economy and are paying increased rates for energy, shipping, labor and ingredients.” So even as the number of hens dropped, the cost of feeding them rose.
The good news is that egg prices began falling after January’s high. Average egg prices fell from $4.82 a dozen in January to $4.21 in February and $3.45 in March. The USDA predicted that, barring an avian flu resurgence, prices would continue to fall throughout the year.”
“Consumer prices rose faster in April, driven by another round of sharp increases in rental prices—and raising ongoing questions about whether a return to 2 percent annual inflation is possible.
Overall, prices rose by 0.4 percent in April, according to data released Wednesday morning by the Department of Labor, after ticking upward by just 0.1 percent in March. The annualized inflation rate fell to 4.9 percent, down slightly from March’s annualized rate of 5.0 percent.
Even though those numbers are a far cry from the 9.1 percent annual rate posted as recently as last June, it’s a worrying sign that inflation seems to have settled into a range that’s significantly higher than it had been for decades. The average inflation rate between 1990 and 2020, for example, was about 2.3 percent.”
“Public debt since 2020 has grown by $3 trillion. According to the latest Monthly Treasury Statement, government spending in March of 2023 alone was twice the revenue collected. The deficit in the first six months of FY 2023 is about 80 percent as large as the deficit for the entire FY 2022. Our mid-year deficit is $1.1 trillion, compared to $667 billion at the same point last year. Falling revenue collection is responsible for only 17 percent of this difference. The other 83 percent is overwhelmingly due to excessive and increased spending.
In simpler terms, the decline in the debt-to-GDP ratio cannot be attributed to spending cuts, even as we move away from what’s now widely regarded as an excessive fiscal response to the pandemic.”
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“Government debt as a share of the U.S. economy is falling.”
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“The main driver behind the reduction is inflation”
How Tariffs and the Trade War Hurt U.S. Agriculture Alex Durante. 2022 7 25. Tax Foundation. Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions Erica York. 2022 4 1. Tax Foundation. Lessons from the 2002 Bush Steel Tariffs Erica York.
“The thing about excuseflation is it’s sort of grounded in truth. It’s the idea that companies are using these once-in-a-lifetime disruptions. Think about the supply chain hiccups that we’ve had. Think about the Ukraine-Russia war. And they’re using those one-off disruptions as an excuse to raise prices. And that sounds fair enough. You know, companies, they have expenses. If their input costs go up, maybe it makes sense for them to pass some of those on to customers. But where it starts to become insidious is when they’re raising prices so much that they’re seeing their profits go up quite substantially as well.”
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“Sure. So one of my favorite examples, because, you know, I love these personally, but chicken wings. Let’s talk about chicken wings and Wingstop. Wingstop is a very large purveyor of very delicious chicken wings. And what they’ve been saying on their earnings calls is that they have been raising their prices for their delicious chicken wings. And the reason they’ve been doing that is because the wholesale cost of your basic chicken wing went up quite a lot during the pandemic. We had a lot of disruptions at various farms, chicken farms with labor shortages and things like that. So it made sense that chicken wing prices went up and the company started passing those on to consumers.
The issue now, though, is that we have seen a substantial drop in chicken wing prices. And yet the company isn’t saying that it’s going to start dropping its prices. What it’s discovered, much like a lot of other businesses at the moment, is that actually this strategy of making up what you lose in sales volume with higher prices, so you’re selling fewer products, but you’re selling them at higher prices, [is] a viable strategy in the current environment, and it’s working for a lot of companies because profit margins are up.”
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“baker in Chicago kind of laid it out for us. He said: “Whether it’s rye flour or bird flu, that impacts eggs when it makes national news just running a business, it’s an opportunity to increase the prices without getting a whole bunch of complaining from the customers. It’s not that we’re out there price gouging, but, you know, timing can be everything.””
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“think about the reason that we tend not to like monopolies as consumers. We want, you know, a vibrant landscape of lots of smaller businesses that are all competing with each other so that we get a better value for our money. What happens when you have an industry-wide event that gives a group of businesses an excuse to raise prices: They are all effectively, not officially, but effectively acting as a monopoly. They can all say, well, you know, it’s bird flu, so we’re all going to raise the prices of our eggs.”