When the September jobs report was a cataclysmic clunker, President Biden rolled out his teleprompter to read a prepared statement reassuring Americans the fragile economy is making headway. "Jobs are up, wages up, unemployment down--that's progress," the nation's chief executive boasted.
While the economy has improved since the pandemic throttled growth, the distance from the current situation to the robust expansion of 2019 is a far, far galaxy away. Any growth would beat 2020 when the economy contracted 3.5%, the largest decline in 74 years.
Mr. Biden is right. America is better off today than March of last year. However, before he took office, the economy had righted itself with 4.1% growth in the final quarter. A steady recovery was underway, as American businesses were allowed to reopen. That rebound has continued at rocky pace.
Mr. Biden's view of the economy from the Oval Office is out of step with main street America. Consumer confidence, a key predictor of spending, has plunged more than 19 points since its peak in June, according to the Conference Board. Consumers are clearly not feeling Biden's optimism.
Nagging supply chain bottlenecks, spiking inflation and millions of unfilled jobs are dragging down American businesses and hurting consumers. Dismissing these as temporary is betting against trends that began in the first quarter of this year and have worsened.
Many U.S. businesses, both large and small, rely on parts, including microchips, as well as assembly for cars, appliances, cell phones and computers (to name a few) from overseas suppliers. Foreign factories ship these items by planes, container ships and trucks to ports and warehouses in this country.
During the pandemic, major disruptions occurred in the supply chain as overseas factories and manufacturing plants for goods, such as clothing, textiles and furniture were shuttered. Reopening these firms has been slower than expected while demand has skyrocketed.
This imbalance between demand and supply is creating scarcity and driven up prices. Costs for these goods are passed on to consumers, which fuels inflation. This supply chain turmoil is aggravated by the lack of workers in the U.S. to unload ships, stock warehouses and transport goods.
The September report highlighted this dilemma. Despite the president's upbeat economic assessment, the economic added 194,000 jobs, 306,000 below expectations. American companies cannot find workers to fill these openings. This labor shortage is strangling businesses' efforts to meet demand.
At the end of June, job openings in America leaped to 10.1 million, the highest level ever recorded, according to the Department of Labor. Job placement firm Indeed estimates there are now 10.5 million job openings, an indication scare labor is becoming a fixture of the U.S. economy.
The mainstream media downplays the shortage as one that impacts only low-paying jobs in leisure, hospitality and restaurants exclusively. This is untrue. There are 1.6 million unfilled jobs in those industries, but there are also 1.5 million in the critical healthcare and social assistance segments.
Every business has been hamstrung in hiring people, despite generous wage increases to lure workers. Businesses in retail, wholesale trade, education, trucking and the information industry cannot find employees to fill their jobs. The trucking industry needs 68,000 drivers to fill jobs.
Many out-of-work people have been receiving stimulus checks as well as extra federal and state unemployment benefits. Some states are ending their programs, but continuing federal government benefits incentivize workers to remain on the sidelines, particularly impacting small firms.
A second issue is the vaccine mandate imposed by private and government entities, leading to firings and resignations. The mandate is exacerbating the critical job situation. A December 8 deadline looms for many businesses, including airlines. Already thousands of workers have been fired or resigned.
The Bureau of Labor Statistics and the Department of Labor do not track the number of jobs lost due to the vaccine mandate for political reasons. However, the Bureau of Labor Statistics shows 10.3 million people left their jobs in September, a distressing signal for businesses.
Mr. Biden pointed out the labor shortage is boosting wages for workers. However, wage growth in lagging behind increases in prices. Over the last 12 months, the Consumer Price Index (CPI) has ballooned 5.4% while Americans' wages rose 4.6%. The CPI does not include food and fuel.
Food prices hit their highest level in a decade in September as prices surged 32.8% in the 12 months through September, according to the Food and Agricultural Organization of the United Nations. An increase of this level has not been seen since 2011.
The Labor Department's August inflation report, the latest one available, showed prices for meat, poultry, fish and eggs climbed 8% over last year, but that is a jump of 15.7% since August, 2019. Beef prices have leaped 12.2% over the past year and bacon soared 17%.
Food is not a discretionary expenditure for consumers. While Washington may view this as just a temporary blip, Americans are feeling the pain right now. A rosy view of the future will not solve today's crisis, which is hardest on low-income households.
Consumers are also feeling the pinch at the gas pump. In 2019, the average price of regular gasoline was $2.25 a gallon, according to the American Automobile Association. In some states, prices were below $2. The average price today is $3.28 and rising. A year ago the price was $2.18.
For perspective, the cost of filling a 15-gallon tank has spiked from $33.75 in 2019 to $49.29 today. In a month, the average driver is paying nearly $200 for gasoline. The Bureau of Labor Statistics calculates energy prices have soared 24.8% over the past 12 months, while gasoline jumped 42.1%.
Crude prices are fueling the increase in the price at the pump. Prices for a barrel of crude oil passed $80 at the end of September. Bank of America predicted a cold winter could push the price of crude to more than $100 a barrel, the highest level since 2014.
Unfortunately, energy prices may deliver another gut-punch this winter. Natural gas used to heat millions of American homes is ratcheting up to new highs. Natural gas prices have risen 47% just since the beginning of August. Demand at home and globally is outstripping supply.
Much of America's economic pain is self-inflicted. Continuing stimulus payments, increased unemployment benefits and child care government checks have made work look less attractive by comparison. The government has played a large role in the labor shortage.
Fuel costs are a direct result of the administration's pledge to eliminate fossil fuel. The government cancelled a major oil pipeline, halted drilling on government lands and all but ended fracking. The result is less investment in domestic oil exploration and drilling and more dependence on foreign oil.
Food prices too are effected by hikes in gasoline, diesel and jet fuel which are used in the transportation of produce and other grocery items to stores across the U.S. Farmers are also paying more for fuel. All those costs are passed on to consumers in the form of higher prices.
Politicians and markets are adopting a cheerful view that things will gradually return to normal as supply and demand are perfectly aligned. Early predictions were that would happen before the end of the year. Now economists and even the administration are forecasting early next year.
Meanwhile, American consumers don't have the luxury of waiting until 2022. They are suffering under an inflationary bomb that is destroying their purchasing power. Runaway inflation will shove the economy over the cliff, crushing growth. Ignoring the evidence is a recipe for economic disaster.
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