Whether or not rising wages fuel inflation depends on productivity. So where is productivity headed?
The Fed may be making progress on inflation, but that progress is unlikely to stick if costs keep rising more than productivity.
Labor Productivity vs Costs Long Term
Production and nonsupervisory wages started accelerating pre-pandemic, unit labor costs rose sharply after the recession.
Why Are Wages Rising Faster than Unit Labor Costs?
I suspect the answer is more part-time work and more hourly work without benefits. Illegal immigrants likely receive no benefits.
Stagflation and Greenspan’s “Great Moderation”
Fed Chair Alan Greenspan is credited for what economists now call “The Great Moderation”, a period of steady disinflation (lower and lower price increases).
Productivity minus costs rose from 2002 to 2008. Then, despite declining productivity, the Fed struggled to raise inflation, at least as measured by the CPI.
Case Shiller National and 10-City Home Price Indexes, Rent, and OER
OER stands for Owners’ Equivalent Rent. It’s the price one would pay to rent one’s own house, unfurnished, without utilities.
The allegedly low inflation from 2010 to 2020 was a mirage. Inflation was rampant, but the Fed (economists in general), foolishly ignore housing prices in their measure of inflation.
The Fed missed massive inflation in housing and assets, and asset prices are still bubbling.
The CPI Broken Record Continues, Rent Keeps Rising, Otherwise Inflation Is Cooling
For discussion of the CPI, please see The CPI Broken Record Continues, Rent Keeps Rising, Otherwise Inflation Is Cooling
Free Money
Nothing is more inflationary than paying people to do nothing.
Q: Who did that?
A: The government, three times fighting the Covid pandemic and the results speak for themselves.
Real Disposable Personal Income and Real PCE
Real Personal Income Chart Notes
- Real means inflation adjusted by the PCE price index.
- PCE stands for Personal Consumption Expenditures.
- Transfer payments are free money handouts such as Social Security, Medicare, Medicaid, and the three huge rounds of fiscal stimulus.
Excluding transfer payments, real income has gone nowhere. But the huge handouts led to equally huge jumps in income and spending.
The Fed has been struggling with inflation ever since. Demographics adds to the problem.
A huge wave of boomers retirements is in progress. Skilled boomers are now replaced with unskilled Zoomers (generation Z), who do not seem to have the same work ethic.
So, it’s no wonder productivity is in the gutter.
This is the battle the Fed is fighting. Is the Fed winning? For how long?
Judging from the CPI, it may appear the Fed is winning the inflation battle, but asset prices are still soaring. Home prices have barely begun to fall. And wage growth vs productivity is hardly encouraging.
Add it all up and it’s not quite right to suggest a Fed victory over inflation.
Correction
An astute reader caught an error in my read disposable income chart. It’s now fixed.
The Fed knows rising wages increase inflation. A decade of manipulating 2 percent BLS measure of inflation, the Fed’s objective has been to stagnate wage gains at 3 percent. Wage negotiations are proportional to the measure of inflation. Same with social security increases, government wages and entitlement programs.
Before the pandemic, Walmart incrementally raised minimum wage to $15 per hour (government/social pressure). Visiting the store every quarter, grocery prices noticeably increased. Now Walmart’s average grocery prices are on par with Kroger. Walmart lost its advantage on grocery prices (except for $1 french bread).
Sorry, Mish, but lower and lower price increases are just slower and slower inflation. Disinflation is when real prices become lower and lower.
The “great moderation”?
And as DR. Ravi Batra pointed out in his book: “Greenspan’s Fraud”:
“If demand and supply are to be balanced over time, then either wages rise in sync with productivity, or productivity growth must be matched by the growth of wages plus debt…so debt growth was the only way to maintain demand-supply equilibrium from the 1970s till today.”
“If demand and supply are to be balanced over time, then either wages rise in sync with productivity, or productivity growth must be matched by the growth of wages plus debt…so debt growth was the only way to maintain demand-supply equilibrium from the 1970s till today.”
Absolutely.
The fact that, when you Google household debt, it’s so much easier to find “Household Debt Service Payments as a Percent of Disposable Personal Income” than it is to find “Household debt as a percent of income” says it all.
Most prefer we not focus on total debt, but instead on cheapness of debt, rather we than start talking about wages vs debt dependance.
The majority of Economists are on a payroll from private, for-profit entities, their bias is to cater to the payer.
The Koch brothers, in particular, have a long history of manipulating consensus this way.
In 1973, Charles Koch tried to convince Friedrich Hayek to move back to America from Austria, Hayek said no, he needed to stay there for his social healthcare benefits – Koch then sent him a pamphlet on Medicare/Social Security to lure him, all the while using Hayek’s theories to lobby government to eliminate those benefits.
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I just googled, “who employs economists?“
agree. the great moderation. what a bunch of bunk. i’m shocked guys like mish post that rubbish.
It is much more difficult to increase productivity in a services driven economy than a manufacturing driven economy. Productivity has declined as a result of the US off-shoring manufacturing. That’s to be expected. The wave of Boomer retirements also means a reduction in productivity as we replace more experienced boomers with their less experienced off-spring. The size of the boomer population also means a reduction in the relative size of the workforce, meaning businesses are having to compete for workers, so wages go up while production stagnates. The very definition of a loss in productivity. We are going to have to rely on the very forces of capitalism to fix this problem. Meaning business owners investing heavily in equipment to profitably boost productivity. Those willing to take those risks will be the long-term winners.
Forces of Capitalism, Assemble!
If you dislike capitalism so much, please stop using all products and services provided by privately-owned, for-profit businesses. After you do this, you are welcome to hang out in the woods behind my house and shiver in the rain while you hunt insects to eat.
Inflation is NOT caused by the private ownership of the means of production. Inflation in caused by snowballing debt costs being passed along into the prices of consumer goods. This is caused by the bank-controlled money scam where all money is created by private banks issuing loans. Learn more at bank LIES dot ORG.
Mish, I have been in Thailand nearly 40 years. The government from time to time raises the minimum wage. When I arrived here in 1985 the wage was 65 Baht per day, which was about $2.50. I opened a small factory producing fragrant incense products for export. At that time Chinese labor was less than $1/day and India was similar. Over the ensuing ten years or so, Thai labor was increased to about $10/day. We were not able to compete with India, China, and Vietnam and gradually we were forced to shut down.
Everytime the wages increased, the costs of everything increased more than than the wages. I have never perceived any benefit to anyone except the government by the wage increases. The government gets more VAT, more EXCISE TAXES, more income taxes, etc.
Otherwise known as “The Tax System.”
I would wager that a huge chunk of the higher wage pressure is coming from higher housing costs, but no one ever talks about this.
I am almost certain that if actual rents started to fall (not asking rents or new lease rates) and housing prices started to fall, wage pressure would evaporate. Right now, there are many many people out there who can’t accept job offers for jobs they actually want, simply because the wages wouldn’t pay the rent or mortgage.
Your perspective is too simplistic. Yes, housing prices are way up. But a large part of that is caused by rising input costs for builders. Where I live in the Midwest, twenty-five years ago concrete was under $40 per cubic yard. Spring of 2023 concrete was $180 per cubic yard. And is now in July of 2023, concrete is already up to $215 per cubic yard. This is happening while the housing market and construction are slowing down! House builders have no choice but to pass these price increases on to the buyers.
What is the mysterious force that causes all prices to rise over time? The usual definition of inflation is an increase in prices due to a devaluation of the currency unit because of too much money creation. But MISH has pointed out that the link between money supply and prices is weak. For example, money supply is falling right now while prices are rising!
After studying this for years, I find myself agreeing with scholars like Margrit Kennedy about the cause of inflation: the bank-created money system and the long term effects of snowballing interest costs passed along in prices.
“They” say the money supply is shrinking. Is that real? Who keeps buying all the debt? The ordinary boy or girl buying hundreds of billions of ten year treasuries for less than 4%? Personally I do not believe any numbers emanating from the BLS, The Fed, or any other department of the American government.
You are wise to be skeptical. The entire bank-controlled money system is built on a foundation of lies, deception, confusion and the threat of violence. That being said, the numbers from the St Louis FRED website are the ones used by most people in these discussions. I believe they are trustworthy, but I can’t prove it.
I talked to a forensic account who understands the bank-controlled money scam. He has studied mountains of financial statements and he believes the accounting provided by the Fed and the banks are highly accurate.
I believe my own eyes and ears when I’m buying groceries or paying the utility and insurance bills.
Does the Fed not have public accounts and another accounting system that we can’t see?
Then I just watch the government spending so or of balance with income it makes the head spin.
Who buys all that debt?
Wonking Out: In Economics, a Game of Teams
July 14, 2023, 1:43 p.m. ET
Paul Krugman
HBO may have captivated millions with its series “Game of Thrones,” but economists have lately captivated, well, not millions — maybe a few hundred nerds — with their Games of Teams: noisy and sometimes testy public disputes between opposing factions over economic prospects.
True, economists’ games have been rather lacking in sex and, at least so far, violence. The teams playing these games are also, I’m sorry to say, almost entirely devoid of beautiful people. But while I’m tempted to use the old line about how academic disputes are so vicious because the stakes are so small, these debates matter. As John Maynard Keynes argued at the end of his magnum opus, “The General Theory of Employment, Interest and Money,” economic ideas can eventually have large real-world impacts:
Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
A current case in point is the determination of central banks across the world to get inflation down to 2 percent. Why 2 percent? That target emerged in large part from academic research suggesting (probably wrongly) that inflation at that rate would be more or less optimal. But that fixation has since taken on iconic status, with monetary officials insisting that failing to achieve it would fatally undermine their credibility.
Which brings me to the disputes of the past few years.
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link to nytimes.com
In an online debate with economist Steve Keen, Paul Krugman revealed that he doesn’t know how money is created, nor how banks work. He said that banks only lend out the deposits of savers. This is completely wrong! In fact, private banks create new, digital money in their computer AFTER the borrower signs the loan contract. Banks create new money with no need for prior reserves or deposits (proofs at bankLIES.org). And over 95% of the entire money supply is created this way — by private banks!
This proves that Nobel prizes are given to people who don’t understand their own fields of study.
Another “inflation” article complaining about government statistics and conflicting reports without ever defining what inflation is or what causes inflation. And you never addressed whether rising wages are causing inflation or if rising wages are a result of inflation.
For example, if the US Post Office raises the price of a stamp in order to cover rising costs of materials, labor, and fuel, is the US Post Office CAUSING inflation? Or are they REACTING to some other force in the economy that makes all prices rise over time?
So what is inflation, and what is the cause?
Previous posts by MISH show that the link between money supply and rising prices is weak and unreliable as a predictor of rising prices.
Could it be that the bank-controlled money system that requires ever-growing levels of debt and interest payments forces individuals to raise prices over time in order for people, businesses and governments to avoid default on bank loans? Keep in mind that 1) banks create all money by lending, 2) money is extinguished when it is repaid, and 3) there is never enough money in circulation to repay all loan principal and/or interest.
price inflation on goods and services in a world wide multiple tens of trillion dollar economy, is very hard to determine. certainly the BLS and mish cannot do this. currency debauching, or coin clipping, or money supply is simple to calculate. this is much easier to follow. and over the centuries, the lag in money printing and prices of things can be very short term to many decades. it’s a mugs game. stick with the currency printing. keep your sanity, too.
But money supply is falling while prices are rising! Mish showed this in a previous post.
Also, governments DO NOT print and spend money into circulation; governments get all revenue from taxation and borrowing. Every dollar spent by a government was created by a private bank. Private banks create all money, NOT government. (If government could create their own money to spend, there would be no national debt.)
I think you are correct that IN THE SHORT TERM, high volumes of money flowing into a particular sector can cause prices to rise quickly (For example: easy mortgage money flowing into housing markets). But the overall rise of all prices in all sectors (even those sectors with no connection to freshly-created digital bank money) suggests a different force at work. Research by smart people like Professor Margrit Kennedy and Swiss economist Peter Bernholz make a strong case that snowballing DEBT and interest charges built-into prices cause inflation. This can happen even when money supply is falling.
When the govt spends more than it takes in and and fed just buys the debt all that money goes into the economy, hence inflationary forces come into play.
All gov debt auctions happen AT the Fed, but the Fed only buys a relatively small amount of government debt. The vast majority of gov debt is purchased by huge financial entities called primary dealers (AKA bond dealers). Where do these entities get the unlimited trillions of dollars to buy debt? It is created digitally in bank computers.
Regarding the gov debt purchased by the Fed: The 12 Federal Reserve banks are privately-owned, and are controlled by private banks in their districts. When you say “The Fed creates new money to buy gov debt”, you are really admitting, “PRIVATE BANKS create new money to buy gov debt.”
It is true that the Fed’s Board of Governors is appointed by politicians. But this board is more of an advisory panel, and they DO NOT have the ability to create new money. Only private banks and the 12 bank-owned Federal Reserve Banks have the ability to create new dollars.
Proofs at bank LIES dot ORG.
Pete:
True but over the pandemic I believe the fed bought most of the govt debt hence contributing to the inflationary tsunami unleashed from the stimulus. They are only now trying to reduce their balance sheet shrinking the pool of cash swimming around.
money supply is still up over 100% from covid. shadowstats is the best site to follow on this topic. mises.org, too. i don’t give a hoot if mish thinks shadow states are kooks. the infamous larry summers admitted they got it right. mish has been wrong on this topic. he runs a great blog, especially his r/e analysis.
Summers, who helmed the Commodity Futures Modernization Act, which allows futures & derivatives to be manipulated in secret by large entities & TBTF’s, because those trades are “proprietary”, that gave us $145 oil without supply or demand problems and initiated the market crash of 2008.
You mean that Larry Summers?
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John Williams at Shadow Stats predicted a hyperinflation in the USA no later than 2013. Bob Murphy from the Mises Institute predicted a hyperinflation to happen before 2011. Both were wrong because their models of money creation were wrong.
John Williams thinks government “print and spend” money into existence. This is not true! In fact, governments get all revenue from taxation and borrowing.
The Mises Institute still pushes the debunked “fractional reserve banking” and “money multiplier” models. These fake models pretend that the money being loaned to a borrower exists in an account before the borrower arrives. And these models pretend that banks relend the same money over and over. This is all nonsense! The truth is that banks create new digital money when they lend AFTER the borrower signs the loan contract, and with no need for prior reserves or deposits. I have contacted the Mises Institute 3 times and asked them to either correct their blatant error, or provide proof that the “Fractional Reserve” and “money multiplier” models actually exist. They brushed me off.
Proofs at: bank LIES dot ORG
“And you never addressed whether rising wages are causing inflation or if rising wages are a result of inflation.”
Neither, we have a supply problem as a result of labor shortages…after 14 months of rate hikes to suppress the economy JOLTs is still 9.8 million, that’s insane.
Employers have no choice but to lure workers with better wages.
Meanwhile, we send away desperate South Americans at the border because, well, we don’t want them “taking our jobs”?
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Over 3 million illegal immigrants have entered the USA since Biden got into office. NYC, Chicago and other large cities are protecting them and giving them free housing . We are not exactly sending people away.
Housing and gasoline prices have tripled in my area in the last 30 years. And guess what – SO HAVE WAGES. Rising labor costs are not due exclusively to a worker shorter.
Gasoline was $1.11 in 1997 and is now $3.29 in my town. Is there also a gasoline shortage? Nope. Just inflation.
Inflation fo r most people is prices going up.
Regular people don’t care about or listen to the self fellatio of economists.
You are correct Pete and definitely not perplexed. If every loan was paid off and extinguished there would be no money left.
Except no one expects everyone to pay off all loans at the same moment.
Yet again confusing a stock with a flow.
No one is confusing anything. It is mathematically impossible to repay all bank loans. A few individuals may achieve debt freedom, but collectively it is impossible. What people may or may expect is irrelevant to this issue.
Banks create all money when they issue loans. When the money is repaid, it is extinguished, which means it no longer exists. There is never enough money in circulation to repay the bank loans plus the additional interest that is due. For example, the total debt from all sectors is over $80 trillion compared to a money supply of just over $20 trillion.
To avoid default, people must borrow more and more money into existence through bank lending. This causes perpetual debt, constantly growing debt levels and endless interest payments. AKA involuntary servitude to private bankers.
This is relevant to MISH’s article because compounding debt and snowballing interest are the most likely causes of the constant inflation we’ve experienced in our lives.
I have always felt that widely diffused greed was also a significant contributor.
So, you think Ford automobiles have risen in price from $300 to $60,000 in 100 years because Ford is greedy? Then why did the prices of Ford cars DROP from $950 in 1908 to $300 in 1923? Why was greedy Ford not RAISING prices?
And if greed causes inflation, how can you explain the hyperinflation in the Soviet Union from 1917-1924? Capitalism outlawed, and making a profit was punishable by the death penalty. Yet prices skyrocketed to absurd levels.
Please meditate on the effects of surging money supplies and snowballing interest costs being added into prices. And when this starts to make sense, please open your eyes to who issues and controls our money system and forces us into ever-growing debt: PRIVATE BANKS.
Having owned real estate for many years … I don’t recall the huge rise from 2010 to 2020. Maybe as I have been holding, I didn’t recognize how much I lost from 2008 to 2010 … and thus when that recovery was added to the normal increases of that time, it seemed much greater.
“I suspect the answer is more part-time work and more hourly work without benefits. Illegal immigrants likely receive no benefits.”
I suspect the opposite, we have a labor shortage, make those immigrants legal with temp work visa’s, put them to work legally in exchange pending citizenship application.
“Whether or not rising wages fuel inflation depends on productivity. So where is productivity headed?”
This morning I hit the drive-through for a coffee, GenZ cashier has me wait while he flirts with a co-worker, glances at me as I wait, then goes back to flirting, she finally interrupts him to give me my coffee that’d been sitting there the whole time.
We have a labor shortage, Zoomers could care less about losing a job, there’s plenty more.
Add the Boomer problem, I see no alternative than to loosen on immigration.
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It’s hard to give a sh*t about 10 bucks an hour.
Do you understand these jobs are entry level jobs for extra cash like students etc?? None of this work is supposed to be a wage you can raise a family on. If thats not enough money for the worker he can upgrade his skills /education and get a better job. You comment sounds like the Berne Sanders/ Pocahontis monetary policy. The fact is these workers are basically fat lazy asses who have no work ethic. This is why the country will circle the drain. Coddle this snowflakes.
Do you understand the value of 10 bucks?
I do and my teenage kids do. They’d love to get a 10/hr job with no benefits (they don’t need them) but they aren’t allowed to or companies won’t hire them.
When I was a teenager there were plenty of jobs that paid WAY less than minimum wage that teens / college kids were doing and I was working 10-20 hrs a week when I was 14.
Noninterest bearing deposits almost doubled from $3T in Q1 2019 to $5.5T in Q2 2022. They are down 20% to $4.8T.
Banks lend less, cut cost, but triple their profit (on zero interest rates). Instead of lending to RE for collateral they will lend to innovative co and industries.
Every day we add new immigrants plumbers, carpenters, air conditioner repair men… employing crews of new immigrants, speaking the same language, competing with each other. What else can they do.
Are you saying that banks get the money they lend from the deposits of savers?
Transaction deposits have declined at all.
I think the work from home dynamic is under appreciated as a source of poor productivity. Yes I know there are some suspect studies that suggest this improves productivity. Recall How a number of years back yahoo stopped allowing work from home because they found out nobody was working at least not on stuff for yahoo.
This aligns with my own experience. I would say the majority of professionals I know spend an enormous chunk of their day doing nothing. With nobody looking over your shoulder, and no chance of the boss walking by your desk there isn’t much downside to spending your day on whatever you like.
Working from home can improve productivity, I just think the net effect is less productivity.
“I would say the majority of professionals I know spend an enormous chunk of their day doing nothing.”
If someone you know as a “professional” is sitting around doing nothing, they are not a professional. A true professional will use that time to catch up on required training. A CPA will need CPE (continuing professional education) to retain CPA status. Lawyers in some states (the real ones with real GDP) need MCLE (minimum continuing legal education). Engineers, depending on the type, need continuous training too. As do doctors and nurses and pretty much any real profession.
If a professional has completed all their training and they still don’t have anything to do that is the employers problem not the employees. A neurosurgeon has expertise in areas of the brain so if you hired one and don’t have anyone that needs brain surgery, why did you hire them in the first place?
I consider myself a professional in a variety of fields but I don’t always have work to do with my specific skill set so I willingly volunteer to help out in other areas but I do that cuz I’m cool and always seek opportunities to learn but I would feel fine telling my employer to go pound sand if the activity didn’t fit my job description.
The truth is companies, at least the smart ones, are hoarding labor because they know they is a massive shortage of professionals coming. Do a little research and it will become very clear very fast.
I wasn’t really interested in a semantic discussion on how you personally define a professional. If “people being paid a salary for professional white collar positions” works for you as a more verbose version of what I said than I am deeply thrilled.
The reality is there is a veritable army of people out there who are working 15 hours a week for a 40 hour a week job. That is not positive for productivity although it’s a sweet life. I realized how easy it was when I recognized I would be quitting due to my employers vaccine mandate.
I mailed it in for 2 months and nobody said a word. I got stuff done just not stuff the company wanted.
Oooh, an ARMY of slackers!!
Is there some point you are trying to make here?
a very serious book, by a great anthropologist and economist, david graeber, “bullshit jobs, a theory”,explains the past century BS jobs out there. a wonderful read. many of my most serious pals, hated the book. too close to home.
A blurb on the book: “There are hordes of people—HR consultants, communication coordinators, telemarketing researchers, corporate lawyers—whose jobs are useless, and, tragically, they know it. These people are caught in bullshit jobs.”
I can name one company (that I don’t like by the way) that probably has all of the jobs above by the thousands and has a market cap of $800 billion – Facebook.
The same could be said about Google or Apple, you know the companies driving the S&P to new highs. I think there are very few “bs” jobs because every job evolves into something else over time.
I’ll pass on reading the book.
you read one paragraph. another know it all. hat tip to your arrogance and ignorance. made me LOL.
The trick is to appear to be very busy, no matter what, and keep campaigning for a promotion.
My company got a lot more productive when we went remote. They realized it pretty quickly, and got out of their office leases. They still own one building, but only a few people ever go there except for the parties.
All the people I work with understand where the paycheck comes from, and they know it will stop if we don’t keep that golden goose happy and healthy. It’s actually part of our interview strategy to discern whether candidates understand that or not. Our job, ultimately, is to Keep the Eagle Sh*tting.
If you hire crap employees that don’t get this, or don’t care, they’re gonna slack whether they are in the office or at home.
bingo
The first question I ask myself when considering interviewing with a company is how can I make this company a lot of money. The rest has always taken care of itself.
“Whether or not rising wages fuel inflation depends on productivity. So where is productivity headed?”
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Perhaps in classical economics but in the real world more money circulating in an economy will result in higher inflation as most people will spend the increases they receive and sellers, recognizing that more money is available, will increase their prices to take advantage.
How would they manage to do that?
If the economy has 1 trillion dollars and 1 trillion widgets in it then each widget cost 1 dollar. If the amount of money doubles and productivity also doubles then you have 2 trillion dollars and 2 trillion widgets. How could each widget cost more than 1 dollar since you’d just go elsewhere if someone tried to charge more.
Try a more real world example like apartments or vehicles or haircuts.
Productivity can’t rise in apartments and probably can’t rise in haircuts (minus more people doing their own at home like I do shaving my head). But it most definitely can in vehicles.
Unfortunately in vehicles, the cost of raw materials is rising, plus endless more gadgets / safety features on the car making it more expensive too.
But TVs, computers, microwaves, phones (minus the bleeding edge) etc have never been cheaper.
“But TVs, computers, microwaves, phones (minus the bleeding edge) etc have never been cheaper.”
Wonderful. All of these items are bought and held for years at a time so they don’t adequately describe the issue.
When car dealers sense more money floating in the economy, they raise prices above MSRP. Landlords raise rents. Hair stylists raise their prices.
“How could each widget cost more than 1 dollar since you’d just go elsewhere if someone tried to charge more.”
Once a sector is controlled by a handful of massive publicly traded companies that have a disproportionate share of total market, prices tend to increase.
M&A might be good for shareholders, investors and traders, but not so much for consumers.
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I would be willing to pay more for my widgets because I want them in a hurry – like right now.
“A huge wave of boomers retirements is in progress. Skilled boomers are now replaced with unskilled Zoomers (generation Z), who do not seem to have the same work ethic. So, it’s no wonder productivity is in the gutter. This is the battle the Fed is fighting. Is the Fed winning? For how long?
Bingo Mish! I’ve said for some time that the fed isn’t fighting the ghost of inflation past but the ghost of inflation future and that ghost is demographics.
It occurred to me that I may have gotten housing all wrong because even though there is massive building of new homes and apartments right now, they may be the last batch of mass produced homes in a long while given the demographic crisis. if this is the last “good” supply of homes/apartments then prices will only go up as new supply dwindles and no one around to fix older homes.
Every day we lose plumbers, electricians, carpenters, brick layers, etc to retirement and we also have young people that won’t touch these professions with a 10 foot pole.
It bears saying again, we have a drain of labor the size of Niagara Falls and incoming replacement labor the size of a garden hose. The immigrant labor we get crossing the border is capable of flipping burgers or cleaning hotels rooms but not building houses.
We are headed for a huge supply/demand imbalance and not just for housing but everything else over the next decade.
Actually we get a lot of trade / construction workers from Mexico. You think they don’t build buildings there?
Most of them can’t pass exams / requirements to be certified here but that doesn’t mean they can’t do the work. I’ve used plenty of ‘cash only’ foreigners (we get more islanders than Mexicans here in Florida) to do trade / construction work at a fraction of the cost of US labor. At worst, you need 1 certified US worker to oversee and sign off on the finished product.
“Most of them can’t pass exams / requirements to be certified here but that doesn’t mean they can’t do the work.”
Agree 100% but read carefully what you just wrote… “can’t pass requirements to be certified” so who is going to carry the liability – you or the buyer that will sue you?
I left out a key word in my original sentence, I should have written “certified structures” instead of “building houses.”
“…so who is going to carry the liability – you or the buyer that will sue you?”
As distasteful as I find using illegal workers is, this is also true with legal workers, your liability is yours regardless who performed the work, onus is on you to inspect & supervise.
Liability aside, workman’s comp is an entirely different issue, get caught with illegals and you are, for lack of a better term – screwed.
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exactly correct. did the same for decades from carolina to az to ca to nyc. the immigrants work very hard and can build. my mexican guys could build windows from scratch, to match 100 year old craftsmen bungalow windows and so much more. many are highly skilled and can do many trades including heavy unskilled labor without attitudes.
Exactly. This is why I don’t understand why comprehensive immigration reform has not occurred. Secure the border, let those in who will work and pay taxes and pave the way for easy citizenship. With all the labor shortages this would be a common sense approach?
Because they’re easier to exploit if illegal.
Sadly, yes.
That said, get caught in my state and surrounding, you’re done, kiss your licensing & credentials buh-bye, it’s a nasty criminal offense.
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Thank God for DeSantis. There is only a shortage of Americans who will be exploited and work cheap. The Real Estate investors think they are smart because they know how to exploit people. Self preservation at other people’s expense is never good.
“The immigrant labor we get crossing the border is capable of flipping burgers or cleaning hotels rooms but not building houses.”
This is a joke, right? I’m in construction management and let me tell you, almost ALL of the labor on jobsite is Mexican or Central American and it’s been that way for as long as I’ve been in the industry (about 15 years). It’s true that you don’t see as many Mex electricians or plumbers but their numbers are slowly increasing.
There is a difference between “day laborer” that will pour concrete and do other onsite work and certified electrician or plumber required by city/county/state code to certify a structure. Building codes will continue to change and evolve and I suspect a whole new “green” certification will be coming to a construction site near you along with solar panel expertise, batteries, etc. I remodeled my kitchen and the “certified electricians” got it wrong twice, they were not familiar with updated city code and city inspector wouldn’t certify until they fixed it.
I’m not thinking about the labor needed yesterday or even for today but the labor that will be needed tomorrow, the educational requirements will go up and unless countries south of the border have a school/university certifying people before they come up, it ain’t gonna happen.
correct. the dopes who think only boomer amerikans build houses is both ignorant and arrogant. men who never renovated, restored or develioped houses for a professioln
Most Americans are too lazy to do hard work. The cruise lines (NCL) tried Americans and the result was terrible, In my county you can’t find an Anglo roofer.
America sounds like Thailand. All the labor comes in from Burma, Laos, and Cambodia. The Thais do not want to work.
“…you don’t see as many Mex electricians or plumbers but their numbers are slowly increasing.”
You don’t see any, nor will you.
Licensed trades require a 5 yr low pay apprenticeship plus school in most states, even apprentices are required to be registered. If a licensed electrician or plumber get caught using unregistered workers, they lose their license.
That’s like a college grad losing his degree, it’s not just a job lost, but a career.
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Gotta believe that house asset prices are being reflected in OER with a lag.
The Fed can’t win a productivity battle and they can’t increase supply. They don’t play in those games.
Technology wins the productivity battle with a lag after costs rise. This will happen. Net costs for services and durable goods will fall.
Layers of regulation and rising energy costs means high investment costs for new assets. High entry costs means supply will be constrained and remain a problem. And asset prices will continue to rise.
“The Fed can’t win a productivity battle and they can’t increase supply. ”
Exactly.
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The FED can do the opposite of what they’ve been doing. They can tighten monetary policy while gradually driving the banks out of the savings business (aka, the “Taper Tantrum”). That propelled the dollar higher, employment higher, inflation lower, and real interest rates higher.
There are limits of the Fed’s powers.
The only way to break the (below mentioned) cycle is to increase supply, in this case labor supply is the weak link, the Fed has no control of that.
Since 1980 the Fed has had to decrease rates to dampen the lack of real wage growth and government revenues as a result of pro-corporate/wealthy tax breaks, deregulation and globalization (Outsourcing).
The Fed has no say on fiscal, tax & regulatory policy, they can only control rates and buy assets (create bubbles and soften debt burden).
That falls on Congress & the Executive, whom all face elections that are usually decided by the one with the most campaign money.
SCOTUS decisions – Buckley v Valeo and Citizens United, have made bribery legal, wealthy entities can limitlessly bribe whichever candidates will cater to their interests, and, SuperPAC’s do not have to disclose who their donors are.
This also leaves the door open for foreign adversaries to use American straw donors to influence our elections and disinform voters.
Several years ago, when Lev Parnas and Igor Fruman were caught funneling Russian money into a Trump PAC, they were only caught because the Feds happened to be watching them.
The Fed can only buffer results of elected officials catering to bribes “donors”, and it has been doing so for decades – Household debt to income and Fed debt to GDP are a perfect way to see the results.
This in mind, I don’t see the Fed getting more aggressive, not until something drastic happens to affect federal & household debt, and either wage disparity comes down or taxes go back up at the top.
$32 trillion in government debt, household debt to income is thankfully below its height in 2008, but as the Fed slows economic activity that will go up, the Fed knows neither can afford servicing that debt for very long.
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The FED’s powers are awesome. But they take their cue from the private sector, the ABA.
Exactly.
The Fed has no power to bribe student voters the way President Biden can.
Productivity was rising until JFK assassination. It slumped under LBJ, Nixon
and Carter. Greenspan great moderation was during the oil glut. China and NAFTA increased productivity. The dbl tsunami destroyed it. The campaign against Putin might increase it.
Even though the stimulus was fiscal, it would not have been as inflationary as it was if the Fed had not monetized it by buying the bonds the government issued to fund the stimulus, with money created out of thin air.
Colorado tranquility : it was your money. No printing !
Rent is falling in 57 out of 100 major cities.
In a word “Bullsheet”
the cost of a NEW lease is falling, not existing leases.
link to mishtalk.com
I’m not really following, existing leases don’t go up as well as not going down. So where are the 1/2% monthly increases coming from? Has to be new leases.
Lease renewals go up.
Duh.
Finally. Maybe he’ll actually get the message this time.
Labor productivity minus labor cost : after tsunami #1 in 2008 and tsunami #2
in 2020 productivity minus hourly earnings (brown) plunged to a new all time low.
Raiding in, transferring money from the rich to the poor – to the unemployed, to small business owners, to shingle mums, to people ho earned under 100K/y, rent forgiveness, student loans bs ==> destroyed hourly workers productivity.
The rich outsmarted the poor. Their stock markets speculations, buy backs and bonuses made them richer. WFH didn’t care about work. They became less productive even less than the poor !!
Go on, pull the other one!