As U.S. employers grow desperate to find workers, wages are increasing, with the average hourly pay rising 5.5 percent since last March. This comes as the broader inflation picture remains at four-decade highs, with prices surging 8.5 percent. Jill Gonzalez, Analyst, WalletHub, joined Cheddar's Opening Bell to discuss inflation and the state of the U.S. labor market.


Opening Bell

Inflation Rising Faster Than Wage Growth

we're joined by Jill Gonzalez analyst at wallet hub Jill wages grew 5.5% from last year, but the worker shortage that still remains at an all time high with that. Is there a sense that these kind of heightened wages just aren't enough to incentivize even more workers coming back? Yeah. What's happening is even though wages have been increasing inflation has been increasing even more. So that's something that's not able to be kept up with right now. If you combine that with the worker shortage, that's where we get this sense of, you know, something's gotta give here. It's really not enough to keep up with what people need to sustain themselves financially with that inflation picture. Even the reality of the jobs report that we got this past friday that showed labor force participation just slightly down yet still the the inflationary picture when it comes to raise wages at 5.5% and then this broader kind of inflation picture 8.5%. Do you think the Fed decision to raise interest rates by the rate in which it's raising it right now actually is going to help things out or do does the Fed have to get more aggressive? I think the Fed is looking at getting more aggressive, you know, raising it slightly I think will help, But I think they're going to need to go an extra point or have a point to really make things, you know, even up a little bit, I mean, as you said right now inflation is at around eight and a half% September 5%. So it's really growing, it's expected to double in the near future. Let's take a step back for a second. Can you just talk about the state of inflation in the US, you know, how bad it has actually gotten because sometimes it can feel like a slow boil and we don't realize it because it's just incrementally going higher, but before and after, it can also be pretty shocking here. What do you see in terms of, you know, just how bad it's got, what the future of inflation is and the big question whether we hit a peak. So right now we're looking at what's called stagflation, so that essentially is, you know, the economy is stagnating. We have a relatively high unemployment in some areas, we have certainly a decrease in the workforce and we have wages that are not keeping up paired with rising prices, inflation. So, you know, at a macro, we can look at that as a decline in GDP and this time of just everything else kind of rising. So for the average american that boils down to economic hardship and you know, nothing really coming in as much as you needed to, you know, as much as you're spending. So for the average american obviously not great news and it's too soon to tell right now to see if we're at a peak at inflation, I mean there are some good signs, you know, freight costs are going down in terms of shipping and trucking. That is certainly good news. But even if we are to peak right now, that doesn't mean that overnight and immediately prices are going to stop increasing and start dropping were still probably going to see some increasing for the next several months. You brought the word stagflation and I'm glad you did because we've been hearing that word gets thrown around. I don't know that everyone fully understands it and you gave us a good definition of it. But in terms of reality, what does stagflation means to the average person? What does it meant historically when we have seen a period of stagflation before? So the last time that we saw stagflation like this probably goes back to the 70s and you know, again, a time of war, which is what we're seeing now. Uh, you know, this time around, paired with the pandemic, certainly does not help. But that stagflation in the 70s had effects that we saw for the next 20 years. A lot of that had to do with gas, gas prices kind of reserving gas. So now we might see that similarly on the gas front, but on a lot of other fronts too, especially when it comes to manufacturing kind of the state of what we've been seeing in terms of just how delayed shipping is. We're seeing it trickle down through our food sources, things like that. So I think that we will see lasting effects of this and it really just boils down to those rising costs and economic hardship for most americans. Energy is obviously a major picture in the overall inflationary picture. Can you talk about that a little bit in terms of how it's playing out right now in the US when it comes to inflation and energy, Yeah, energy again. So we saw it back in the 70s when it comes to, you know, how we're running things, what we're using as power sources back then. It was, you know, pretty strictly gas and we will see that pretty heavily on the gas front this time as well. But when it comes to things like solar energy, other alternate fuel sources, that's where I think we'll see this start to shift next. It's just interesting to me because obviously we're all looking to the Fed to kind of get inflation under control, but when it comes to think things like energy having a major impact on inflation, there's not really much that the Fed can do all. It's only lever right now really, is to raise interest rates slow down the economy a little bit. But that's not really going to change anything. I think makes a further argument for the stagflation picture right, where inflation is still elevated, but growth in the US is slowing down or even potentially contracting. Yeah, I mean, I think the Fed is going to try and do anything. It can kind of as a reactive measure to just how quickly we're seeing inflation rates increase, you know that being said, a lot of this is just a global picture and obviously the Fed has no jurisdiction globally, so we are going to see things continue to to be dictated by how the war is playing out. If there is another wave of, you know, in the delta and omicron, you know, whatever is coming next year, you know, those things affect kind of what we're seeing globally as well, where there are lockdowns, where there are shipping problems abroad, so inflation is going to be impacted kind of by all sides. Now, the Fed is going to do anything. It can to try and slow it down, just at least where we are the reality. To the point you're making there is the stars aligned just perfectly to get the picture that we have today. And so we kind of have to hope they lined just perfectly to kind of undo what has been done here. Really appreciate your time and your insight Jill Gonzalez analyst at wallet hub