I still dont see how a recession is coming when we have such a shortage of labor.
I agree, for the US. We are in a very different economic “crisis” than anything we've ever seen.
We are facing the mass retirement of baby boomers. And to make it worse, they are the most skilled population segment we have. So everyone is moving up a step in terms of responsibility and pay, but there aren’t enough people to fill the gaps. This results in two things. A general lack of competence in the workforce as so-so people are hired to replace retiring highly skilled people (and I’m not just talking blue collar here, this goes for all white collar professions too), and an absolute hollowing out of the lowest tier of the entry level workforce resulting in huge pay increases for the bottom tier. This is a result of the demographic bulge of the baby boomers.
I find it hugely ironic that the Democrats made such a stink about $15 minimum wage. Restaurant servers are getting $20 starting wage around here.
Regardless of where you are on the political spectrum with regard to illegal immigration, the fact is that there are plenty of job openings for anyone who wants to work. It would be nice if both political parties worked together to fix our immigration system so we could have the right amount of legal immigration but both sides are making political hay from the current situation, so thanks for the leadership guys.
Now, add on top of this the economic destruction we had with Covid, and now the huge economic destruction we are having with the Russian war on Ukraine. People are predicting mass famine in a year in the poorer regions of the world when farmers have record low crops due to not being able to buy fertilizer now due to the war (Russia and Ukraine produce a huge amount of the worlds fertilizer inputs, and natural gas is also use to produce nitrogen fertilizer and Russia’s natural gas is going offline). The list of disruptions due to that war is long and important, neon for chip making, pig iron for steel making, etc.
Also, the world’s manufacturers are realizing that China isn’t very stable these days (Covid lockdowns have been continuing to hurt, and then you have unstable and unpredictable politics), AND their wages have skyrocketed. So manufacturing is in the process of reshoring to North America mostly. Even Apple is currently moving 25% of their manufacturing from China to India.
So in the short term we might get reduced economic output due to supply chain issues (unless the economy gets really good at substitution?). But that is going to be balanced by a big re-industrialization rebuilding for the next ten years.
Oh yeah, capital. All of these relocations are going to cost a lot of money. Meaning that interest rates are going to rise naturally anyways since there is going to be a lot of equity sales and borrowing going on to raise $$$.
I expect the Fed’s interest rate rises will continue AND it won’t dampen economic activity because we (the US) are actually in an expansionary phase of industrial plant building. People are freaking out about 3% interest rates. People have no memories. During the last huge expansionary boom, the dot-com 90s, we had 6% interest rates and liked it. Higher interest rates and a roaring economy are NOT mutually exclusive with the right set of circumstances.
Regionally, there will be big differences. North America as a whole is going to do great. We have food surpluses as well as cheap locally produced energy. The rest of the world is going to suck in the short term, then just be bad for the medium term. If you think Texas is getting crowded now (I was just in Houston and it was traffic jam city everywhere) you ain't seen nothing yet. Their cheap energy, huge tracts of empty land, and low regulatory footprint all make it very attractive. States close to Texas will get spill over positive effects - the deep south will continue attracting investment.
Tesla will continue to do well in this environment because they have their sh*t together. In general, companies with disruptive technologies will do great.
My middle son was a teachers aide last spring in Austin while he has been going through a software engineering bootcamp. This fall the Austin school district made him a 5th grade teacher. The principal knows that he could get a job offer any minute, but she had no choice. The school district is way understaffed and week after week they have COVID outbreaks that reduce teaching staff. Two weeks ago my son had 40 students in his class because teachers out with COVID. He doesnt have a teachers certificate, his bachelors degree is a double major of Political Theory and Arabic. He was supposed to go into Peace Corp, but pandemic killed that. My daughter in-law is a counselor at the school and she is getting called in to sub classes because of shortage.
Yep, Texas unemployment will soon start to be expressed with an extra digit like 0.72%
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