With April’s CPI surging faster than expected, Nela Richardson, the chief economist at payroll processor ADP, joined Cheddar News to break down the country’s inflation and discuss how inflation might be impacting the job market. "We're not seeing the freeze in hiring. If you recall that April jobs report that 428,000 jobs created, that's still solid and robust," she said. "We are hearing though the challenge of setting wages in an inflationary environment. We are hearing from companies that employers or employees are coming to their bosses and asking for a cost of living increase on top of the wage increase they may have already earned to keep up with inflation." 


Closing Bell

How Inflation Might Be Impacting Labor Market, Wages

Welcome back to cheddar news is closing bell. Everyone I'm kristen Schoeller down here on the floor of the stock exchange and fresh inflation data out this morning showing that the pressure consumers face in the U. S. Is still present and certainly impacting the stock market as well Today The consumer price index in April up 8.3% from the same time a year ago. That was even above expectations of a gain of 8.1%. Now the prices of essential goods surging and isn't clear when inflation will start to subside from these 48 year highs. Some saying in fact it could take a year. So joining me now is NEla Richardson, chief economist at ADP Anila, thanks so much for coming on the show. What is your reaction to the april consumer price index that we got this morning? Well it is an acceleration. And what you see is it's an across the board acceleration. I note uh what hits main Street really hard right now, that's food prices there, there's a big jump in food prices. Uh there was uh jumps in housing or indices and measures tied to rent. That's also problematic. We know that appears with the lag. So that might not be the end of the story. So inflation is still elevated. We are seeing pockets of good news. We saw a little bit of a dip in energy prices. That's likely to though to be short lived because we know that gas prices increased at the latter half of april outside the measurement period. So I guess the big takeaway is that inflation is high. Uh And it's still going to be with us for some time to come. How will this impact the labor market Neil? I know you're the chief economist at ADP higher prices. Could that lead to more freezes in hiring Right now? We're not seeing the freeze in hiring. If you recall that April jobs report that 428,000 jobs created, that's still solid and robust. We are hearing though the challenge of setting wages in an inflationary environment. We are hearing from companies that you know employers or employees are coming to their bosses and asking for a cost of living increase on top of the wage increase they may have already earned to keep up with inflation. And why that's important is real wages though they've gone up by five and a half% 2.6%. So even though the paychecks have gotten bigger, the dollar doesn't go as far. And that's a real problem for companies right now trying to hire and trying to retain their workforce, interesting. Um So let's pull up a full screen here. I want to break down these numbers vanilla for our viewers category by category in terms of the price gains that we saw in this latest report. So these are month over month gains in most cases gains of course with the exception of energy, but we do expect that to tick back up april versus March. So airline prices up nearly 19% after they gained more than 10% month over month from february to March. Transportation services, 3% food up about 1% shelter up about half a percent the same as the case from for medical care. And Mila as you rightly pointed out, their energy was down just a hair but again, really short lived. And I think the core um the core index does indicate that inflation could be here to stay. So what position does this book companies in? Are you finding a mila that companies are not only offering wage increases but cost of living increases to employees as well? You know right now there's a lot that's on the table because in the midst of high inflation numbers remember we're also at a labor shortage, there's about 1.9 job openings for every unemployed worker. So this is a real tough position for companies to be in and they have to be creative about how they attract and retain. Uh We've seen wages be one of those cornerstone assets that companies are offering the increasing wages but also uh they're looking at perks but not perks like catered lunches and ping pong tables. Those are the perks of the past. We're talking about flexibility, more hybrid options, the ability to work from home. Um and set your own calendar. That's a big driver now of what employees want when we look at sentiment measures which we do regularly at ADP of where the worker is going in terms of the workforce. They really want that flexibility. And our survey indicates that they are willing to trade off some wages in order to get more flexibility. So there may be a window for companies looking to keep their workforce without escalating their wages, their wages. Now, the big question after the stock bar, excuse me for the stock market and certainly Main Street as well is has inflation peaked? Where do you fall on that? Do you think inflation is peaked? And at what point might we start to see some of these still high inflationary pressures really actually meaningfully start to ease? You know, I think this could be a peak moment. I don't know if that's the important question though. I would ask the question Has inflation plateau Dude, what is going to be the meaningful driver that drives inflation down? We know that wages aren't keeping it up. So at least we're not seeing wages contribute to the inflation picture right now. But really it's going to have to come from the Fed and the Fed has an awfully blunt toolkit and that's demand destruction. So we're going to have to wait and see whether we can see some meaningful, substantial decrease in inflation by the end of the year and at what cost that inflation coming down comes to growth. All right. It is a harsh reality, but Mila, we're grateful that you can break it down with us here on Cheddar news in Closing Bell. That's Neela Richardson, chief economist at ADP.