- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Workers Find Leverage in a Tight Labor Market
October 19, 2021
The Week Behind
The labor market has been hot since nationwide restrictions eased in the United States, and pandemic concerns took a backseat to a push back toward normalization. A year and a half after the total amount of workers claiming unemployment insurance peaked at 23.1 million, just 2.5 million remain, only 800,000 above the pre-pandemic level on March 2020. Despite continued claims in the unemployment insurance program nearing normalcy, the BLS reported more than 3 million more job openings in August 2021 than in February 2020. There is a serious gap in employment at the moment, and at a time when demand is surging on consumers' excess savings.
It is at these points in time that laborers have the most power over employers. Across industries, companies are dealing with new order growth that is faster than capacity growth. Unfilled orders, especially in manufacturing, are building. Nondefense capital goods (ex-aircraft) unfilled orders were up 9.9% YoY in August 2021 and haven't been this high since 2012. Many of the supply distortions can be traced to shortages in commodities; however, there is no shortage of "for hire" signs. Workers can sense a heightened demand for them and, after historic levels of stimulus from the government, feel that compensation should align with that demand.
Indeed, it's a perfect storm for labor disputes. Many sidelined workers and employed workers (who have been forced to fill the gaps in the workforce) are ready to take action to improve their conditions. Strikes have been threatened are have already started in many industries. The Hill reports that around 100,000 unionized employees have authorized strikes with some currently striking. Here are some of those groups:
- 2,000 Buffalo, NY hospital workers1
- 700 Massachusetts nurses1
- 1,400 Kellogg plant Workers in Michigan, Nebraska, Pennsylvania, and Tennessee1
- More than 24,000 Kaiser Permanente health care workers in California and Oregon1
- 450 steelworkers in Huntington, West Virginia2
- A one-day walk-off of 2,000 telecommunications workers in California2
- 1,000 Alabama coal miners2
- 400 whiskeymakers in Kentucky2
- 200 bus drivers in Reno, Nevada, were already on strike2
- 2,000 carpenters in Washington (settled)2
- 600 Frito-Lay workers in Kansas (settled)2
- 1,000 Nabisco factory workers at five plants (settled)2
- 60,000 members of the International Alliance of Theatrical Stage Employees (IATSE) authorized a strike with 98% members approving (pending settlement)3 4
Cornell University's New York State School of Industrial and Labor Relations has tracked 254 different labor strikes that have started in 2021 so far with 111 of those in the last three months. In the two years of before (2019-2020), the ILR school tracked only 59 labor strikes. The BLS, which only tracks work stoppages of 1,000 employees or more, has recorded 12 so far in 2021 which is up from 8 in 2020 and so far in line with 20 in 2018 and 25 in 2019.
These labor disputes, if they continue, could contribute to the forces driving above trend wage growth in the US. The latest employment situation report in September saw average hourly earnings of production and nonsupervisory employees up 5.5% YoY up from 4.8% YoY in August. Annualized wage growth for these lower level employees has averaged 4.8% YoY since the pandemic started, well above the 2.9% YoY average from September 2016 to March 2020. At the moment, it seems elevated wage growth will continue as the hot labor market gives workers leverage in an economy wanting desperately to get back to full capacity.
Chart of the Week
As manufacturing orders have rebounded strongly as pandemic restrictions eased, manufacturing employment has not kept up. The ratio of manufacturing orders, new and unfilled, to manufacturing employees has reached its highest point since June 2013 (disregarding a July 2014 outlier).
The Week Ahead
Economic news out of the US slows this week but invites big inflation reports from Canada and the eurozone to take center stage. The Bank of Canada is another central bank that has been grappling with a tapering decision as its own surge in inflation has grown out of the recovery. We will also get a glimpse into manufacturing with IHS Markit Flash Manufacturing PMIs on Friday.