by Mish

For a two-year stretch between summer of 2011 and summer of 2013 wage increases less than 2% were the norm.

Yet, firms complain about labor costs while simultaneously complaining about the lack of workers.

Bloomberg reports Firms Under Pressure as Labor Drought Grows, U.S. Survey Shows.

"A growing number of companies are finding it difficult to recruit skilled workers, which threatens to curtail profits and growth, according to a quarterly survey conducted by the Washington-based National Association for Business Economics.

The results of NABE’s July Business Conditions Survey published on Monday showed that 34 percent of respondents have had trouble hiring skilled employees over the last three months, up from 27 percent in January. The Washington-based association polled 101 panelists, who are economists from companies and industry associations.

In response, companies are sponsoring foreign workers, expanding their search and hiring more independent contractors, according to the survey. They’re also boosting automation, stepping up internal training and in some cases improving pay, Jankowski said.

Perhaps at least partially as a result, more than a third of respondents cited labor costs as having the largest negative impact on their profits so far this year."

Year-Over-Year Wage Growth

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Year-Over-Year Wage Growth

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Is 2.6% wage growth too hefty even as corporations complain about a lack of workers?

What’s Going On?

  • It’s not just salaries. Obamacare and benefits are hurting many companies.
  • Cheap money from the Fed keeps zombie companies alive.
  • Cheap money from the Fed induced (and still does) overexpansion fast of food restaurants and retail stores of all sorts.
  • Workers really are not worth benefit costs plus an extra 3% so companies seek to automate.
  • Are McDonald’s workers worth $15? Please be serious.
  • Amazon and online shopping are weakening retail profits.

Finally, I suspect the survey is deeply flawed. Does some random small to medium-sized company have the same weight as Walmart?

The regional Fed manufacturing and ISM surveys seem to have that defect.

Yet for now, enough stores are still expanding which adds to job growth despite automation. Apparently, the goal is a McDonald’s or a Walmart on every corner.

We will not quite get that far. Rampant expansion will turn on a dime at some point, most likely globally.

Mike “Mish” Shedlock

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