Ed Yardeni is worried about impact of labor strife on U.S.’s inflation battle
What’s on our worry list? The labor market, specifically the unrest fomented by the effects of the pandemic and inflation. Labor unions have grown in might, their members are on strike, and employers are being forced to meet their demands. So we are adding a renewed wage-price spiral to our worry list, which could happen if a rebound in wage inflation leads to resurgent consumer price inflation.
2. Pandemic’s inflation effects: The pandemic triggered a surge in inflation that started during 2021, peaked during the summer of 2022, and has moderated since. At first, inflation seemed to cause a wage-price spiral. While wages increased rapidly, so did prices. Inflation-adjusted wages stagnated from mid-2020 through early 2022. Many workers were frustrated to see that their pay increases were eroded by rapidly rising prices.
• 1,400 pilots at Spirit Airlines SAVE, -2.87% went on strike July 1, demanding better pay and benefits. The strike involved pilots at Spirit Airlines’ main hub in Fort Lauderdale, Fla. The pilots are members of the Air Line Pilots Association. • The United Auto Workers has three separate contracts with General Motors GM, -4.53%, Ford Motor F, -1.86% and Stellantis STLA, +0.05% that are due to expire on September 14. Ahead of contract negotiations that began on July 13, the head of the UAW declared that its 150,000 members are prepared to strike against the Big Three U.S. automakers if the automakers do not meet their demands.
We continue to expect that rebounding labor productivity growth will be consistent with wages’ rising faster than prices. We will be monitoring some of the following wage data:
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