Thanks Biden! Inflation Eats Into Meager Wage Growth, Turns Net Growth Negative

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This was one of the most predictable things, wasn’t it? We all saw this coming a long time ago and the fact that it has already taken place is making us chuckle. Some might be thinking that we are going to be the bigger person here. That is the furthest thing from the truth.

When you know that you are right about something of this magnitude, there is nothing wrong with gloating a bit. Sometimes, you just have to laugh and say the three words that the liberals never want to hear: I told you so. So what are we so happy about? CNN has more (and they agree with us!):

“Companies big and small are raising wages to attract workers and hold onto employees as the economy revs back into gear.

But those fatter paychecks aren’t going as far, thanks to rising inflation.
In fact, compensation is now lower than it was in December 2019, when adjusted for inflation, according to an analysis by Jason Furman, an economics professor at Harvard University.

The Employment Cost Index — which measures wages and salaries, along with health, retirement and other benefits — fell in the last quarter and is 2% below its pre-pandemic trend, when taking inflation into account. (Wages and salaries are growing at a faster pace than benefits.)

“The hot economy is heating prices more than it is heating wages,” said Furman.”

The incentives that were placed in the relief bills guaranteed this, in conjunction with the massive amount of money printing that had to take place. The federal pandemic unemployment bonus created a world where businesses had to raise wages to get employees through the door. Progressives loved this idea, as they believed it would be a way to lift wages.

While this gambit may have worked in that sense, they have also managed to raise prices significantly. The inflation that has now taken place eroded any additional buying power Americans may have had. According to the Wall Street Journal, the news is not getting any better on the inflation front:

“Inflation remained elevated in July, as the economy continued to rebound amid pandemic-related shortages of labor and supplies.

The Labor Department reported Wednesday that its consumer-price index rose 5.4% in July from a year earlier, the same pace as in June and the highest 12-month rate since 2008.

The CPI climbed a seasonally adjusted 0.5% in July from June, a slightly cooler pace than its 0.9% increase in June from May.

The index measures what consumers pay for goods and services, including groceries, clothes, restaurant meals, recreation and vehicles. The so-called core price index, which excludes the often-volatile categories of food and energy, increased 4.3% from a year before.”

There is another obvious point that the Wall Street Journal has been quick to point out:

“Booming demand as the economy reopens has outpaced the ability of businesses to keep up. Many companies are passing on higher labor and materials costs to consumers. The shortage of semiconductors that has crimped auto production has caused prices to soar for new and used vehicles, as well as rentals.”

Things are going to get worse before they get better. Once the unemployment subsidies are over, the demand for labor and goods is sure to drop. The wage pressure decreases but the inflation remains. The full impact of this inflation on American households is being measured in CPI. CNBC believes that you can find a silver lining in this metric:

“The government said CPI increased 0.5% on a month-over-month basis, matching a consensus forecast from economists surveyed by Dow Jones.

So-called core inflation, which excludes energy and food, rose by 0.3% last month, shy of a forecasted 0.4% increase and well below June’s rise of 0.9%. The core figure is up 4.3% over the last year, a slight deceleration from June’s 4.5%.

Economists often consider core CPI to be a more reliable indicator since it’s insulated from the frequent swings in petroleum and food prices.”

Once the UI programs end in September, there will be a massive flood of workers, as consumer demand fade. The fall and winter could get very ugly.