Thoughts From The Divide – Striking the Iron
“To attain a better standard of living”
Amid high levels of quits and “excess retirements”, it is clear that the labor market is currently running hot. And just as companies have taken rip-roaring demand as an opportunity to raise prices (case in point, Tyson’s latest earnings), so too do workers appear to be, if you’ll pardon the pun, “striking while the iron is hot”. Two high-profile wage negotiations are perfect examples. Kaiser Permanente recently reached an agreement covering nearly 50,000 employees that include both “guaranteed across-the-board wage increases each year through 2025” and a new bonus structure. However, the John Deere employees showed what is currently possible by striking at the right time. Their agreement not only includes signing bonuses, guaranteed wage increases over the six-year contract to the tune of 20%, and three lump-sum payments of 3%, but it also includes “Cost of Living adjustments”, which are nothing to scoff at, with a similar mechanism pushing Social Security benefits up 5.9% for 2022.
“Anti-competitive or otherwise potentially illegal conduct”
While we pointed out evidence last week that price increases are ruffling consumers’ feathers, politicians are upping the ante in addressing inflation pain points. Having already put the meat industry in its sights and taken “bold action” to “push back on pandemic profiteering” amid rising food prices, the Biden administration this week directed the FTC to look at the oil industry. Citing the “unexplained large gap between the price of unfinished gasoline and the average price at the pump” and the “significant profits” oil and gas companies are making “off higher energy prices”, President Biden asked the FTC to “examine what is happening with oil and gas markets” and to “bring all of the Commission’s tools to bear if you uncover any wrongdoing”. Whether an investigation (and pleas to other countries and OPEC) helps lower the price at the pump remains to be seen. Still, Biden’s letter will be of little comfort to other industries who may one day find themselves in the Administration’s crosshairs.
“Tack in a more hawkish direction”
Having already broken the ice on tapering, several Fed voices are now calling for a sped-up timeline. Though doves such as Kashkari and Barkin have said the bank can be “patient” and “shouldn’t overreact”, others aren’t so sure. Earlier this week, St. Louis’s Bullard said it would make sense to “tack in a more hawkish direction “ to “try to manage the inflation risk”. Joining Bullard on the hawkish side was Fed Governor Waller, who said that the incoming data on the labor market and inflation “have pushed me towards favoring a faster pace of tapering and a more rapid removal of accommodation in 2022”. Vice-Chair Clarida wasn’t quite so direct, simply suggesting that it “may well be appropriate at that [December FOMC] meeting to have a discussion about increasing the pace at which we are reducing our balance sheet”.
P.S. While broad lockdowns have not been in place for quite a while in the US, countries across Europe, including Austria, Germany, the Netherlands, and Belgium, are instituting an array of new restrictions and regulations amid surging Covid-19 cases.
