There is some good news to report on the state of American workforce.
Hiring has been robust this year. The job market returned to levels not seen since before the onset of the novel coronavirus pandemic.
In addition, wages for many people have risen. This in part has resulted from the labor shortage issue, which compelled companies to meet workers’ demands for better pay.
Unfortunately, this gain has been offset by inflation over the past two years. The inflation rate rose from 0.1% in May 2020 to 9.1% in June 2022, lowering to 8.5% in July.
The pandemic certainly instigated this trend. Mandated lockdowns disrupted work productivity, which led to supply chain problems.
While much of the federal government’s economic response to the pandemic was necessary, it exacerbated inflation. Some economists believe that President Joseph R. Biden Jr. didn’t pay enough attention to the consequences of taking action last year, passing a $1.9 trillion plan in 2021 on top of what was done during the Trump administration in 2020. There seemed to be more emphasis on Biden appearing proactive — “do something” for the sake of doing something — rather than on carefully assessing how to respond.
“This year, rents have risen slightly faster than they did before the pandemic but significantly slower than they did in 2021 when rent inflation was at its peak. So far in 2022, rents are up 7.2%, compared to 14.8% at this point in 2021. Year-over-year growth has slowed to 10%, down from a pearl of nearly 18% at the beginning of the year.
“On the supply side, a deceleration in rent growth was matched with a slight uptick in apartment vacancies. Our vacancy index stands at 5.1% today and has gradually eased from a low of 4.1% last fall. That said, today’s vacancy rate remains below the pre-pandemic norm, which may be attributable to spiking mortgage rates that continue sidelining first-time homebuyers and keeping more households renting for longer. Rents increased in 79 of the nation’s 100 largest cities in August. But in 68 of those 79 cities, rent growth was slower this month than last month. Annual rent growth remains elevated (15-plus percent) in Florida as well as a handful of major metropolitan areas including San Diego and New York City.”
The Federal Reserve Board has increased interest rates this year to help combat inflation. It raised interest rates in March for the first time since 2018; the board set the rate at zero nearly two years earlier in response to the pandemic. The Fed also raised interest rates in June and July.
This has slowed hiring somewhat. The unemployment rate is at 3.5%, but moving to new jobs is more difficult in various industries.
This Labor Day, conditions for workers have improved over 2020 — but Americans are still feeling the squeeze. Governments often seek to help people in tough economic times by coming up with new spending plans for the sake of providing “stimulus.”
However, this can create more problems than it solves. Officials need to focus on keeping Americans working and reducing their cost-of-living expenses. This will set the stage for holidays we can enjoy with fewer worries about pinching pennies.
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