Inflation Surges As Wages Drop

Price Inflation is the symptom of a more extensive inflation disease uncontrolled growth of the money supply resulting from the Federal Reserve’s loose fiscal policy. Wages are just the price for labor, and as the money supply inflates, wages usually go up as well.

2021, however, is playing out differently so far. Unfortunately for working Americans, wages are falling behind rather than keeping up with rapidly increasing consumer and production prices.

The Department of Labor released data on July 16 indicating that the second quarter median weekly earnings for the nation’s entire full-time wage and salary workforce were 1.2 percent lower than the same period in 2020. The median weekly wage was reported at $990.

The Consumer Price index for the same comparative period increased by 4.8 percent. Inflation-adjusted wages are down 6.0 percent.

Perhaps most troubling for long-term inflation projections was the report on producer prices for June. Producer costs showed their most significant annual increase in more than ten years, directly leading to higher consumer prices for the foreseeable future.

The national average amount of weekly unemployment benefits stood at approximately $620, including the federal unemployment enhanced benefit. The reported data shows that average unemployment benefits pay more than the weekly median for male and female workers aged 16 to 24.

With such generous unemployment benefits for younger workers, many entry-level jobs remain unfilled across the entire country.

The Labor Department’s report also indicated that initial unemployment filings increased unexpectedly last week, with 373,000 first-time claims for the week. That total exceeded the projected amount of 350,000. The Wall Street Journal recently reported that unemployment claims are declining more rapidly in the states that have ended the enhanced federal benefits.

Despite the troubling labor reports, Fed chair Jerome Powell testified before Congress last week to downplay the risk of eternal inflation. Markets were soothed as stocks remained stable even as yields on Treasuries continued to fall. Big Tech stocks continued their recent rallies as well.

Banks maintain a positive inflation outlook, claiming that plentiful jobs and economic growth will counteract issues that could arise from a swollen money supply. Financial companies are typically expected to do well through inflation spikes.