The Wall Street Journal had an excellent article out entitled, “Companies Plan Big Raises for Workers in 2022” and the article essentially states what we already know, finding workers is extremely difficult and the problem seems to be growing.
Interestingly, not too many people have made the connection between various market forces and basic demographics. First, we’ve written endlessly about a massive wave of boomers retiring thru 2030 and by that year, all boomers will be over the age of 65 and able to enroll in medicare and social security. Between now and 2030 however, we have 10,000 boomer retiring each day but their demand for goods and services doesn’t go away when they retire so we have demand but not enough labor.
The problem doesn’t stop there, our research shows some areas of the economy will suffer from large labor shortages over the next decade. The biggest hit will take place in rural areas and farming communities as the migration toward cities continues.
Recently, however, we discovered that other areas of the economies are likely to get hit with labor shortages too. According to the Economic Times, there has been a 9% drop in H1B visas largely due to Covid-19 restrictions and recent changes to the immigration program. The drop in visas at a time of increased demand for tech and engineering resources couldn’t have come at a worse time for the U.S. economy. This will likely lead to more wage pressures in technology and engineering moving forward.
What is the effect of all this?
The Bureau of Labor Statistics recently released a report highlighting a 5.3% decrease in productivity.
Nonfarm business sector labor productivity decreased 5.2 percent in the third quarter of 2021, the U.S. Bureau of Labor Statistics reported today, as output increase 1.8 percent and hours worked increase 7.4 percent. This is the largest decline in quarterly productivity since the second quarter of 1960, when the measure decreased 6.1 percent.
BLS.GOV
To summarize, we have boomers retiring, immigrant workers declining, companies planning on increasing wages and ever increasing demand as the world population climbs from 7.8 billion to 10 billion by 2040. Does the inflation math add up yet?
The best thing to do is prepare an investment portfolio that has defensive stocks, dividends, and potential growth.
Stay tuned and stay solvent.
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