Inflation anyone?

[bigcmagor]

It's been a generation since inflation was much of an issue in the United States. At work, we are seeing pressure on wages as employers raise wages to try to attract our employees. In response, we raise salaries or hourly rates across the board to competitive levels to keep people from leaving. This has to be offset with higher prices for our products. Our non-payroll related operating expenses are rising too, probably as other employers are raising employee wages and their pricing too while they try to maintain profitability.

Without getting into politics, it seems as though we are near full employment in this country. All the while there are increasing deportations and a major push for more jobs through economic growth initiatives. I wonder who would fill these positions if the initiatives are successful.

It seems like a perfect storm of inflationary pressures to me. Is anyone else concerned about a return of inflation like we had in the 1970's?

 

[audreyh1]

Yes, we are near full employment. However, wages are still way, way behind, so it's good that companies are starting to have to pay a bit more. But I think it will take a while for wage pressures to build. There is also the pesky global economy which will probably put a cap on a 70s type runaway wage inflation scenario.

It's true that demographics is shrinking the labor pool. So if we are paying fewer people more, does that really cause cost increases? People are also terrified of the huge leaps in automation causing loss of jobs. Another balance on wage pressures, I think.

 

[Senator]

I do not worry about inflation, but I do think it would cure some of the deficit issues.

I think we will have more and more outsourcing which will decrease prices. Amazon and Walmart have been leaders in reducing prices. Small companies can now compete out of their garage, and one-person companies can sell throughout the world on a low-overhead model.

I can even buy things from China directly, eliminating many US middle cost layers. There is a labor shortage here in the USA, but there are plenty of people here that are not working. Myself included.

If we need more workers, legal immigration can also be increased.

 

[GrayHare]

Like most things the economy goes in cycles. I don't see 18% money markets returning anytime soon though. Barring significant protectionism wage growth should be held down by global trade, and that's a good thing because I can't find my WIN button.

 

[MichaelB]

Here is a very interesting analysis of wage inflation and it's correlation to the employment to population ratio of people in the 25 - 54 age bracket Just how tight is the U.S. labor market? | Equitable Growth

 

[Ian S]

According to this article, inflation isn't going anywhere yet. Maybe there are other factors keeping inflation in check. Perhaps those workers getting pay increases are more productive; if so prices wouldn't necessarily have to rise.
A Quick Look at the Economy Over the Past Four Years – Mother Jones

 

[USGrant1962]

I'm not too worried about inflation. The Fed has had a really hard time getting inflation up to 2.0%, and the civilian labor force participation rate is still around a 35-year low.

https://fred.stlouisfed.org/series/CIVPART

I suspect we will see more "normal" inflation of 2.0-3.0% in the coming years, but nothing ahistorical.

 

[Hamlet]

I'm not too worried about inflation. The Fed has had a really hard time getting inflation up to 2.0%, and the civilian labor force participation rate is still around a 35-year low.

https://fred.stlouisfed.org/series/CIVPART

I suspect we will see more "normal" inflation of 2.0-3.0% in the coming years, but nothing ahistorical.

Add to this that interest rates are down at ~1%. If we get more inflation than desirable, the Fed has plenty of room to raise rates.

 

[sengsational]

It seems to be heating up a little bit. Average CPI-U in 2015 compared to average 2016 was up 1.2%. Average CPI-U in 2016 compared to the average of the first 9 months of 2017 is up 1.9%.

inflation page

 

[audreyh1]

The Fed wants inflation to be at 2%. It's been stubbornly below that most of the past several years.

 

[Texas Proud]

I have not read the linked articles, so I do not know if this has been pointed out...

But the participation rate is way down.... IOW, we have low unemployment but also a large number of people who have left the labor market... they are talking about getting more participation which would lead to more taxes....



I remember when I graduate from college... it was a very down market... not much hiring going on, but inflation was high... I graduated in Dec... but the people who graduated in May got higher salary!!! And the people who graduated the following year got even higher than what we 'one year' employees were getting.... I do not want us to go back to those days....

 

[GravitySucks]

Two things happened to force the 70s inflation debacle.
1. Nixon had to close the gold window so the dollar had no fixed value.
2. OPEC was able to increase the price of a major commodity and everything that relied on oil (and we found out that was everything) was more expensive to produce.
I'm not worried about runaway inflation just yet. But Venezuela shows it can happen anywhere.
Hope the Fed gets their 2% and doesn't run into unexpected consequences to any actions.

 

[youbet]

Two things happened to force the 70s inflation debacle.
1. Nixon had to close the gold window so the dollar had no fixed value.
2. OPEC was able to increase the price of a major commodity and everything that relied on oil (and we found out that was everything) was more expensive to produce.
I'm not worried about runaway inflation just yet. But Venezuela shows it can happen anywhere.
Hope the Fed gets their 2% and doesn't run into unexpected consequences to any actions.

I'll add #3: demand-pull inflation caused by the War in Vietnam.

I don't think anyone is talking about so-called "runaway inflation" here. But even a return to 3% - 5% inflation will be an impactful change. This past approx decade with fabulous market returns and near nil inflation has meant most of us have seen an increase in real wealth. Nice......

A return to more modest market gains and a consistently higher (but NOT runaway) inflation rate will mean we'll have to plan for needing 30% - 40% - 50% more spendable dollars annually a decade down the road.

 

[l8_apex]

Venezuela shows it can happen anywhere

I don't believe that inflation in a small "socialist" country run by a bunch of crooks shows that inflation can happen anywhere. I'd be interested to hear why you believe that this is the case.

 

[Midpack]

It's been a generation since inflation was much of an issue in the United States. At work, we are seeing pressure on wages as employers raise wages to try to attract our employees. In response, we raise salaries or hourly rates across the board to competitive levels to keep people from leaving. This has to be offset with higher prices for our products. Our non-payroll related operating expenses are rising too, probably as other employers are raising employee wages and their pricing too while they try to maintain profitability.

Without getting into politics, it seems as though we are near full employment in this country. All the while there are increasing deportations and a major push for more jobs through economic growth initiatives. I wonder who would fill these positions if the initiatives are successful.

It seems like a perfect storm of inflationary pressures to me. Is anyone else concerned about a return of inflation like we had in the 1970's?

Productivity plays a significant role, higher wages and prices aren’t inevitable. I’m not very concerned about inflation.

I’d be more concerned about how automation may change labor dynamics short term. Could be more disruptive than some changes, until we find a new equilibrium.

 

[GravitySucks]

I don't believe that inflation in a small "socialist" country run by a bunch of crooks shows that inflation can happen anywhere. I'd be interested to hear why you believe that this is the case.

It was not long ago that it was the wealthiest nation in South America.

Think the US electorate couldn't screw things up as bad in two election cycles?

 

[MichaelB]

I'm not worried about runaway inflation just yet. But Venezuela shows it can happen anywhere.

I don't believe that inflation in a small "socialist" country run by a bunch of crooks shows that inflation can happen anywhere. I'd be interested to hear why you believe that this is the case.

It was not long ago that it was the wealthiest nation in South America.

Think the US electorate couldn't screw things up as bad in two election cycles?

What is happening in Venezuela has very little to do with Socialism, lots to do with crooks (and thugs), but nothing at all to do with the US. Bring the US electorate into this discussion and it is politics, which we know is bad for thread length.

Inflation is an economic concept. Why not keep the discussion focused on that?

 

[Texas Proud]

It was not long ago that it was the wealthiest nation in South America.

Think the US electorate couldn't screw things up as bad in two election cycles?

Nope.... No I do not....

 

[ncbill]

I'm more concerned with what's rising far faster than the rate of inflation for early retirees, e.g. housing costs, health care expenses, and, the cost of post-secondary education for those of us with kids still at home.

 

[flyingaway]

I think inflation is a very bad thing (or the worst thing) to a retirement portfolio. Market can crash, but it will usually come back. Inflation is not usually followed by deflation. More than 10% annual inflation in health care cost can be very real.