Inflation ticked up to a 7.5% annual rate in January—its highest rate in 40 years—according to the new CPI numbers released this morning, as strong demand continues to push against pandemic-related supply constraints. This comes on the heels of a January jobs report that not only blew past expectations, but also included huge upward revisions for November and December. Employers, apparently, didn't let the Omicron surge get in the way of hiring new talent, according to Ziprecruiter’s chief economist quoted in the Times, “Companies that struggled all fall to recruit workers weren’t about to reverse course just because cases shot up for a few weeks.” The strong labor market is fueling economic expansion rates that also haven't been seen in 40 years, with Q4’s annual growth at an eye-popping 6.9%.
Rising inflation is not just incredibly annoying for our estimating department, it also threatens to choke off this strong growth. The job of fighting inflation usually falls to the Federal Reserve, who can increase interest rates which, in theory, will tamp down inflation. That may have limited effect in this economy; it’s hard to see how higher interest rates will magically increase the output of Taiwanese chip manufacturers.
One of the biggest contributors to the recent uptick is residential rent rates. One solution for that, as we mentioned last week and many, many times before that, is to build more houses. Everywhere, every type, affordable, luxury, multi-family, let’s go folks. This is a crisis we created ourselves with restricted zoning laws and it’s starting to do real damage. Get out of the way and let people build.
Another big contributor to rising inflation, are folks trying to stop us from moving past this pandemic. From the WSJ, “Detroit-based auto makers have scaled back production in the U.S. and Canada and temporarily sent Canadian employees home because of parts shortages caused by protests against Covid-19 vaccine mandates.” If your job requires you to be vaccinated and you don’t want to that’s fine, you’re free to quit. Plenty of other places are hiring. But the rest of us are trying to put this whole pandemic behind us and you’re holding us up. GET OUT OF THE WAY.