ANALYSIS | INFLATION
What The Federal Reserve Doesn’t Want You To Know About Inflation
Inflation in the U.S.A. is here to stay in 2022.
Supply chains are being disrupted.
But, the exact details aren’t being discussed by the Federal Reserve.
My Texan friend who works for a major mortgage broker in Dallas, Texas, says he has many clients and friends who have retired early because of the pandemic.
Instead of waiting another 2–5 years to retire, much of the older generation have retired early because of the coronavirus.
Many of these jobs are in construction, logistics (transport) and are from highly skilled areas like welding.
A lorry driver recently shared rare insights into supply chain issues and freight problems through Medium.
However, many construction workers come from outside of the U.S.A., including Mexico and Guatemala.
- According to the U.S. Department of Labour, the civilian labor force in the U.S.A. that is foreign-born was 17% in 2020.
- This figure is down from 17.4% in 2019, which accounts for 1.1 million migrant workers.
- This number could be much higher in 2021 because of the border restrictions due to the pandemic, not allowing foreigners into the U.S.A.
- The U.K. is having similar problems because of Brexit. There is a fuel shortage because there is a shortage of more than 100,000 qualified lorry drivers.
Thousands of British petrol stations are now waiting for fuel stations to be replenished.
“Clearly, the pandemic has had a negative effect on the supply of new drivers.”
-Jacob Kirkegaard, Peterson Institute for International Economics in Washington DC.
This is why Federal Reserve Chairman Gerome Powell says inflation is running hotter than expected.
Borders are closed because of the coronavirus with countries like Mexico. It is the longest interruption of border crossing in U.S. history. Construction and logistics jobs cannot be replaced so quickly.
No one knows how long it will take the U.S.A. to fill job vacancies.
“As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors.”
-Gerome Powell, Federal Reserve Chairman.
- According to the Road Haulage Association in the U.K., it takes 8+ weeks to fill 30% of vacancies.
- The total percentage of the Mexican population that is fully vaccinated stands at only 35%.
- Without a loosening of U.S.A. border restrictions, it could be several months before these jobs are filled.
- There could also be another variant from developing countries that would further delay immigrant workers from filling these jobs.
- Even at a fast past for vaccination rates, it could be six months before border restrictions are loosened.
- Another 8+ weeks to fill open jobs.
- Then another few months for inflation to normalize.
Realistically if you add all these time constraints up, the U.S.A. is looking at inflation running hot for at least another year.
The entire world is having these issues.
Even Nike revised their revenue forecasts for 2022 because they rely on 51% of their footwear plus 30% of their apparel from Vietnam factories.
These aren’t “bottlenecks” where shipping containers wait outside major ports of California.
They’re job gaps from a lack of migrant workers and a slow rollout of vaccinations in third-world countries.
This inflation issue is a lack of government preparation for the job gaps caused by the aging population coming to retirement coupled with already diminishing migrant workers coming from countries with closed borders.
The coronavirus has just sped this transition up.
Governments also need to take into consideration that Millennials are choosing jobs in the digital economy. These jobs never existed in the ’80s, ’90s, or early 2000s. Instead of traditional employment in construction and logistics, Millennials are taking jobs as UX Designers or Product Growth Marketers. This matters because Millennials became the largest generation in the labor force in 2016.
If there are 10.1 Million new jobs available in the U.S.A. and at least 1 Million fewer migrants to fill those jobs, when and how will the U.S.A. fill these jobs with migrant workers.
Inflation will not get back under control for the U.S.A. without the appropriate discussions to increase the number of migrant workers while the pandemic still spreads across developing countries.
Yes, third-world countries will take much longer to be vaccinated, directly affecting supply chains or more to-the-point jobs.
Inflation in the U.S.A. is here to stay throughout 2022.
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Thank you for reading,