Business leaders know the financial structure of their company, and many of them know that they can't survive at 2% rates, let alone 5 or 10% rates. The gloom from business leaders is forward-looking. They're fine for now, while consumer spending holds up and they can run on old debt. But as soon as they need to roll over their debt, everything collapses. They'd need to increase revenues by 2-5x, and they can't.
My prediction is that we drive off a cliff. CEOs know their companies can't survive high rates, so they manage as if a Fed pivot is coming. If the expected Fed pivot happens, they bank windfall profits and get huge stock bonuses. If it doesn't, they go bankrupt, everybody is out of work, and it is not their problem anymore.
I fear the cliff scenario because a lot of business models now were built on a foundation of crazy-cheap debt. The tide is about to go out. Eventually the business environment will re-adjust to the new cost of money, but the transition will be tough.
https://fred.stlouisfed.org/series/fedfunds
Last time fed funds rates were as high as they are now was Jun 2019. And then a few more times before that.
I combined them into a single chart here: https://ibb.co/h7c7DJS
(Is ImgBB a good site? I stopped using imgur after too many dark patterns)
Although the Fed can backstop commercial paper in emergencies (and they did so at the beginning of the pandemic), it's extremely unlikely that they start taking on enough to move rates in the medium term (like they did with mortgage backed securities). So this is not a rate that the government controls except very indirectly.
The fact that people don't save the money they don't spend has more to do with how cash works and how it makes it pointless to save.
We can't argue this both ways. You can't argue that business leaders are acting as if the fed will pivot away from the current course when the parent is pointing out that they are all tightening in preparation for more to come.
You see this in the media too - some business leaders (often in tech, or finance) are predicting doom and gloom, while others (like in retail or experiences) are saying that it's business as usual and they haven't seen a downturn yet.
Could probably script this and build a report. I'm not going to do this (I'm working hard and can't afford to be nerd sniped), but please share if you build this. After buying your own positions, of course. :)
From your perspective, what is the underlying reason they cannot survive without excessively low rates?
Your last statement feels like it's primed to hold the Fed hostage, which is worrisome.
The problem is that the ones with pricing power are generally not the ones with high levels of debt, because if they had pricing power, they wouldn't need debt. They may be customers or suppliers of companies with pricing power, though, which forces the latter group to assume lower revenues in the future because some of their customers may go bankrupt.
That would imply that debt-servicing is their dominant cost. That seems wrong (e.g., a grocery store presumably spends a large fraction of its revenue on purchasing groceries from wholesalers).
That'll spill over into losses for the financial sector, possibly a CMBS meltdown and a financial crisis, which will spill over into the real economy.
All the job losses in housing and real estate and the hit to the financial sector will result in unemployed people who are no longer buying stuff so you'll see a contraction in everything consumption related. That'll lead to much lower ad buys, so that'll hit the ad companies. They'll all layoff staff which acts as a positive feedback loop.
Right now mostly we're just seeing companies whose CEOs see this coming down the pike who are laying off some staff early and trying to position better for the recession.
It isn't correct to say that e.g. Google's business is reliant on them flipping over loans cheaply, but they are certainly dependent upon other businesses in the economy being able to flip over loans cheaply.
If a grocery store makes 1% profit on each item it sells, and its debt service cost is 1% of its revenue (making it roughly "1% of its cost") a doubling of debt service cost wipes their margin to zero.
Say you make $100 in revenue and $1 in profit, and $1 of your $99 in costs is debt service. Your debt service increases to $2, your profit drops to zero.
Now your revenue increases to $101, presumably your debt costs stay fixed (this is not a guarantee - revenue expansion costs money), but your non-debt-service costs scale as well, and they are now 0.98 * $101 + $2 in debt service = $101.98. Congratulations, your profits are positive again, but they are $0.02.
I am eliding here the general difference between fixed costs and variable costs, and so it's probably not true that your costs would scale quite this much with revenue, but it's much closer to the truth than that you'd be back where you started, esp. in a low margin business.
Based on your thoughts here I'm going to assume you haven't worked at a small business before. If you have it must have been awesome to work at a place that didn't have to borrow money constantly.
Bear in mind HN's view of the business world and profit margins and expenses is heavily skewed by the industry we work in, which remains one of the most profitable in the world across a wide variety of subsectors. The profit margin an incredibly profitable grocery or shipping company might have would be considered a danger flag for a tech company, and I don't just mean the big ones, either. A profit margin of 5% is not uncommon and 10% is doing extremely well for most businesses. It's easy to look at numbers in the millions or billions and think they can take anything because in absolute terms on a single human's scale they've got more money than you can imagine, but it doesn't necessarily take very much by percentage points before the profits of a normal company go "poof".
I can't imagine why anyone would turn down ads while ROAS is blazing.
Marketers / ad people - is this common? If so, why?
To give OP the benefit of the doubt. Maybe what OP means is that Ad Spend is one of the first lagging indicators to show up. Consumer demand weakens, companies turn down ad spend, and then a few months later the reduction in revenue shows up in the quarterly report. So as an indicator it leads earnings reports and share price drops but lags actual consumer spending.
[1] - https://www.npr.org/2022/09/29/1125462240/inflation-1970s-vo...
Yea and outside of just absolutely ultraviolet kind of hot markets this will mitigate downward pressure on prices now and in the future because home builders (though that's another problem) won't be building homes. Coupled with people who have locked in interest rates, the market seems to me to be poised to grind to a halt and prices to remain quite high.
The problem, though, is that home building needs to continue in order to improve the housing supply problem (caused at least in part by the dearth of home-building during the '08-'12 period) and thus help with affordability. I tend to think that the government needs to step in here and do something to either incentivize home-building and/or at the very least do something to streamline permitting/zoning. Building codes need to be examined to see if there might be innovations that could lead to lower building costs which are currently being precluded. But keeping mortgage rates artificially low isn't the answer, that led to prices getting out of hand.
> But keeping mortgage rates artificially low isn't the answer
I don't know what the solution is for the housing issue, on one hand you have people (like myself) who bought at high prices(and at low interest rates). My house will be a money loser if I try to sell, and this includes the thousands/millions? of people also in my boat(we are essentially trapped in our house and unable to move). On the other hand houses that will need to be built and houses on the market now are not selling, the cost to build a house and interest rates are too high in terms of affordability given current prices of houses. This leads to less mobility for Americans, and for those that are locked in their low rates right now(and bought in the past 7 years or so, and at lower levels pre-pandemic) would be crazy to sell which is another factor driving down supply.
To the extent that there is are "solutions", they all exist in the past now. The best solution is to stop trying to "fix" the market and take the pain now, because the efforts to avoid pain now involve lots of pain later. Unfortunately, it's already "later", and quite a bit later at that, after several previous rounds of "oh crap, we can't have rich people being slightly less rich, better goose the market again!"
Without all of that immigration we could incredibly easily get the supply and demand ratio back under control. It’s by far the easiest solution and could be done instantly. It’s just unpalatable to one side of the political aisle and to some businesses that want cheap labor.
And if people aren't building because it makes more sense to buy a "used" house material prices would also drop.
Permitting, engineering, etc are also expensive.
Finally, construction costs are difficult to estimate up front, so it is difficult to be a rational actor when deciding to build or not.
After all, if you hit a 33% cost overrun half way through building, your best option is to pay the 33%. At that point the house costs 83% of the expected price of starting over. If you stop now, then you are out 50% of the initial budget.
If you think facing such a tradeoff is rare, look around for lots that are for sale with pre-approved plans or partially constructed houses. They're usually pretty easy to find.
I came to the US and found that, not only were the streets not paved with gold, they weren't paved at all. Furthermore, I was the one that was expected to pave them!
I don't think much has changed on that front.
I'm not saying there wouldn't be other issues with clamping down on immigration, but if you're trying to tackle the supply and demand issue it's the easiest way to handle it.
[0]: https://cis.org/Report/Estimating-Illegal-Immigrant-Populati...
Note that's just "enforcement actions," which nowadays largely means giving them a court date and letting them go. It doesn't count anyone who snuck in successfully.
Here's another link: https://www.nbcnews.com/politics/immigration/migrant-border-...
"Inadmissibles refers to individuals encountered at ports of entry who are seeking lawful admission into the United States but are determined to be inadmissible, individuals presenting themselves to seek humanitarian protection under our laws, and individuals who withdraw an application for admission and return to their countries of origin within a short timeframe."
It's not totally clear, but it seems that it also includes other "border enforcement" actions that are not necessarily related to immigration at all, e.g. intellectual property and drug seizures.
So it has nothing to do with what you were claiming.
What is the connection here? And why is there a qualification of "illegal"? If these were legal immigrants, what would that change?
You're implying that demand is greater than supply, which has been quite overtly mentioned by many.
You're right that the type of immigrants don't matter, but the reason I mentioned illegal immigrants is because the amount is completely uncontrolled. Legal immigration we could easily ramp up or down.
I disagree: if Jane first home buyer has an income of $50000, and can only just afford $30000 per year on their mortgage, Jane will bid on a house the maximum she can afford. I agree that over the long term, with everybody acting the same as Jane, then the price of homes is mostly controlled by the interest rates. However interest rates, per se, do not affect the affordability of homes very much.
There are secondary effects that do change things. However the primary market dynamic of bidding as-much-as-you-can-afford means that affordability doesn’t change much. (It also means your population is playing a zero-sum bidding game of how-much-can-we-pay-the-banks, which is bad, especially in New Zealand which doesn’t own most of its banks).
Secondly, the usual answer is to increase housing supply. That would work only if there can be a super-abundance of new supply in a suburb. Think of a desirable locarion, and let’s magically create 20% more homes there. Would that fix supply? No, because the latent demand is far bigger than 20%. Why? Firstly, in my circles in Christchurch NZ, relatively well-off people own multiple homes: their primary home in the suburbs, sometimes a second home or an investment property (rented or Airbnb), ideally a holiday home somewhere which is often empty, perhaps even a town-house in a city. Secondly, in my other circles there are a lot of people sharing a home (one home split into several flats, flatting, still living with parents), so there is a huge latent demand for people that want their own home.
I think that in many desirable suburbs, you could double the number of homes and prices would not shift down in the slightest. For people to own their own homes needs something new to happen.
We have had a housing boom going on in Christchurch for say 5 years now, and house prices went up and up, because people bid what they can afford. Projections are for housing to increase faster than population in Christchurch, but that is not fixing affordability. Statistics: “Christchurch City's most recent population estimate was 392,000 (June 2021). The 2010/2011 earthquakes resulted in a net loss of around 21,000 people, but by 2017 the city's population had recovered to pre-earthquake levels. Projections suggest that by 2028 the population is likely to be around 417,000 under a medium growth scenario.” “In 2018, there were an estimated 148,000 households in Christchurch city. Projections suggest that this will likely increase to around 161,000 households by 2028 (medium series).” https://ccc.govt.nz/culture-and-community/statistics-and-fac... I don’t understand their projections, because on the same page they show a graph with more than 10000 new homes already. Also we have massive housing growth outside of Christchurch - I have seen recent large subdivisions in: Rolleston, Lincoln, West Melton, Amberley, Methvyn, etcetera.
Society would be healthier if the housing market wasn't managed to be a retirement fund. Would likely end homelessness.
Are reverse mortgages a common part of people’s retirement?
https://www.urban.org/urban-wire/reverse-mortgage-use-differ...
> At a time when seniors are sitting on a mountain of housing wealth and have anxiety about their finances, this should be a well-used program. Instead, despite rising senior population, participation decreased between 2011 and 2018, from 73,112 to 33,000 mortgages.
Does not seem like a popular part of peoples’ retirement plans. Even downsizing a house does not seem like it would yield enough of a profit to be a major component of retirement, unless you go from super popular area to middle of nowhere. But I doubt that is people’s retirement plan either.
https://www.medicaidlongtermcare.org/basics/home-ownership-i...
However, I think you're on the nose with the long term care facilities. Medicaid will only pay 100% of any nursing home care (high end or low end) if your countable assets are $2500 or less. Additionally, Medicaid considers your income going back 5 years in order to determine eligibility, so selling (or putting into a trust) sooner rather than later can make sense for a lot of people. https://www.webmd.com/health-insurance/features/when-how-muc...
Construction should be an industry that people care about and policymakers watch out for. But making housing purchases dependent on cheap credit may have been a poor decision, and it's possible that as a result large swathes of real estate as a sector are based on problematic incentives. The housing market needs several resets, and much as it pains me to say it as someone who'd like my own mortgages to be cheap as much as anyone else, it might need years of high interest rates to start getting things back in line -- on top of aggressive vacancy taxes, property taxes scaling on single-family rental volume + inventory scarcity, and anything else that nudges capital towards construction vs operation on existing inventory.
> Basically the fed will do anything in its power to stop inflation
I'm not sure what the limits of the fed's will here are, but what worries me is that monetary policy is not the sole or even primary cause of inflation: big supply shocks and demand shifts in the last 2-3 years are the bigger issue. Monetary policy can only go so far in addressing it.
The Fed failed to follow its own policy, of taking the punch bowl away when the party gets going. It allowed the economy to heat up for too long, and thus the inevitable reversals. Averaged over a few decades it will be the same 3-4% GDP growth that we would have gotten if they'd taken a stronger hand in taming the business cycle.
Their goal is to contain the booms so that the busts aren't so bad. Having let the boom go on, there is no choice but for a bad bust to happen. It would be nice if they'd learn their own lesson for next time, a decade or so away... but unfortunately, everybody loves low interest rates and a roaring economy.
We are also reaching a point where consumers drive the price of residential land less and less. How much difference does the mortgage rate make when the market is increasingly driven by commercial buyers, who don't use mortgages?
"Taming the business cycle" is an empty phrase.
You can increase the rates a small amount by borrowing money, but not indefinitely. Eventually, that borrowed money causes inflation, because it increases the money supply. And eventually, people get antsy, and try to cement their gains.
That's not karma, it's psychology. It's how people have behaved, and it's as predictable as anything ever gets in economics. It doesn't take a deity to invoke a bust; it just takes humans.
I think people's sense of timescale is off. Business leaders are talking about things that we likely won't see for months.
This isn't rocket science; we have insane inflation, rising interest rates, a strong USD and tightening monetary policy around the globe. Where do you see the growth coming from? Have you considered that "things aren't that bad" might benefit one or the other party during the upcoming election?
I’d be willing to bet the distinction is how much labor you employ and what kind (pay bands as proxy). Hospitals for example are in a world of hurt post Covid. Labor is their main cost. Rates are down but remain high. Employee satisfaction is low. Revenues do not keep pace with costs and largely uncontrollable.
Many tech companies are down 80-95%. So if you used to pay employees 100 to generate 100, now you are paying 100 to generate 20 or in some cases 5. This only works if you can massively increase productivity or reduce cost.
There is no evil conspiracy, markets are just down
But on the flipside you have things like housing taking a downturn (not just home prices, but actual housing construction) which negatively impacts all of their suppliers (HVAC equipment, lumber, contracting companies, etc etc).
So there are some of those leaders who have a likely justified negative outlook.
In some other places, I hear that there is no work in that profession. The same appears to be happening to companies, with Facebook down 20% today while oil companies see no signs of recession.
Oil reserve has a mix of different kinds of oils. We’ve been using up the better stuff. Not sure how much of that’s left.
US has a 25 day supply of diesel.
The Administration is announcing its intent to use SPR repurchases to add to global crude oil demand at times when the price of West Texas Intermediate (WTI) crude oil is at or below about $67 to $72 per barrel. This will protect taxpayer interests because the SPR will be repurchasing at a lower price than recent sales, potentially allowing it to repurchase more oil than it released with sale proceeds. It will also help address producer concerns about uncertain demand in future years, encouraging immediate investment."
https://www.whitehouse.gov/briefing-room/statements-releases...
The WH is going to have to wait a bit for those prices. Right now WTI is $89/bbl:
https://www.cnbc.com/quotes/@CL.1
Last time price fell below $72 was December '21.
No [1].
[1] https://www.federalreserve.gov/newsevents/pressreleases/mone...
I don't think he directly said "he won't stop until" though.
I don't think they're being dishonest. I think they're constrained in how forthright they can be, lest they trigger a market reaction.
This is why I said that they try to be honest. Doctors are also inclined to err on the side of optimism when they are uncertain. The difference is that nobody is making conspiracy theories about doctors actually wanting to make their patients sick.
You’ll be able to find it, I believe in you.
No, he didn’t [1]. The Fed’s statements to Congress are tightly scripted, in part so professionals can pick the meat from such popular nonsense.
[1] https://www.federalreserve.gov/newsevents/testimony/powell20...
https://www.bloomberg.com/news/articles/2022-09-21/powell-si...
> Powell told reporters several times that a softer labor market may be necessary to sufficiently bring down demand.
https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...
"... maximum employment and price stability"
I think money supply inflation reflects more the reality and explain the current bearish sentiment.
The former is a fake metric. Measuring changes in the monetary base [1] is a thing. But it’s seldom accurately reflected in a single figure.
Also, the 2.6% is real GDP growth. Current-dollar growth was 6.7% annualised [1].
[1] https://en.wikipedia.org/wiki/Monetary_base
[2] https://www.bea.gov/news/2022/gross-domestic-product-third-q...
I am using M2 money supply. Basically trying to proxy how much money more we printed this past few years.
Source: https://www.longtermtrends.net/m2-money-supply-vs-inflation/
It makes no sense to use a November 2020 rate of change in M2 to adjust a Q3 2022 real GDP estimate. GDP is a production metric. An output of the real economy. M2 is a monetary metric. An input into the financial system. To the degree their relationship has meaning, it’s as a rough measure of financialisation [1].
[1] https://data.worldbank.org/indicator/FM.LBL.BMNY.GD.ZS?most_...
/s
https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo...
Also money printing isn't necessarily inflationary if the money stays as bank reserves. Unless... The Fed buys treasuries and the government dumps the money on the economy.
Strange times. Really hard to capture in data. Only increases possibilities of a major economic catastrophe because the tea leaves are just too hard to read right now.
Where do you work? For the two companies I've worked at during this period I would not use the term "levity".
I'll be honest - I didn't use to think the rich/powerful thought like this. I thought it was just the tragedies of capitalism and the invisible hand needing more protection from market failures.
Then I worked for a billionaire's small company for five years right out of college.
Now I recommend "Wage Labor and Capital" to anyone who I think will be able to manage it's low-two-digit number of pages.
Because if one class does it, its "just how the world works" and/or "capitalism". If the other class does it, its class warfare.
[0] https://www.bea.gov/news/2022/gross-domestic-product-third-q...
So any economic figure described as "adjusted for inflation" should taken with an extra measure of wariness.
Given there's usually a fairly significant magnitude of the variation on inflation figures depending on the exact methodology, I'd expect a similar magnitude for inflation-adjusted GDP no?
You've made the same comment several times.
> but there seems to be a lot of skepticism
Why are you switching to the passive voice? Are you saying this or not.
> Given there's usually a fairly significant magnitude of the variation on inflation figures depending on the exact methodology
Not really. The price of a basket of goods, over time. Same as it's always been. As as already mentioned, GDP takes into account these numbers.
Are you sure you don't have me confused with someone else? I don't see any multiple comments in my history unless you've gone back over 3 months ago. If that's what you're referring to, I have no problem with it, but it just seemed odd.
>Why are you switching to the passive voice? Are you saying this or not.
Passive voice is a perfectly valid style not a mistake, and I'll take that fight to the death. The sentence indicates not just my own skepticism, but also the sense I get from other people on HN and real life where the prevailing opinion seems skeptical.
>Not really. The price of a basket of goods, over time. Same as it's always been. As as already mentioned, GDP takes into account these numbers.
Boy I have a lot of issues with that. It's NOT the same basket of goods. I don't personally agree with many of the substitutions, nor the exclusion of ownership in housing. There are SEVERAL competing measures of inflation and the variance between them I've seen is on the order of 25% of the reported value. That amounts to at least +/-2%, and that really would have a big affect on purported inflation-adjusted GDP when purported growth is similar in magnitude to the variance on inflation.
So, I'm not necessarily saying that the growth values are flawed. But I think I have a healthy skepticism of it, and I think that's appropriate, and, that skepticism is undeniably tied to the published inflation figures. In my industry, there's been massive contractions in investments and resulting layoffs. I've also seen most of my peers restrict their luxury spending because they've been priced out due to inflation. My personal basket of goods has seen an average YOY inflation around twice the purported value.
You may find a clue in the results on Nov 8th.
There's also a 'class' of political leaders (primarily the party out of power) that is trying to give the impression that we're in a recession in order to help their party in the mid-term elections.
Its not a recession, which is why it is weird when looked at as a recession.
OTOH, there is still substantial risk of inflation control measures creating a recession. (And there is a bigger risk of business actions anticipating and avoiding being overextended in case of a recession caused by inflation control measures themselves causing a recession.)
When inflation starts to hit salaries and debt needs to be rolled, we will start to see more business contraction. That is what business leaders are planning for.
Pent-up consumer demand shifted much activity from 2020 into 2021. This is the source of all the apparent weirdness. Every yearly number in 2021 looked great thanks to comparing an artificially high number to an artificially low 2020 baseline. Then every yearly number from 2022 looks terrible, because it's comparing to 2021's number that was artificially high from time-shifted demand.
Remember the "great resignation"? That was an illusion - it was just normal pent-up demand for job switching that didn't happen during the pandemic. The inflation of 2022 is also largely an illusion - it's really just that a few percentage points of what should have been normal inflation in 2020 and first-half 2021 was time-shifted into 2022. (The inflation is real, but the timing is an illusion - it's not really 8% per year, it's a fairly normal 12% over three years.)
If you believe any year-over-year number from 2021 or 2022, you're falling for headline click-bait without considering the underlying irregularities.
[1] https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
Food prices are up 48% at the nations second largest grocery chain.
Rent prices are now through the roof, 20-30% year over year increases are common in major cities.
Things are more expensive, full stop, and it isn't just "an extra year" more expensive.
The right comparison is to look at 2022 compared to 2019 and see if it looks out of line for a three-year period. A few things are, but most aren't.
Also, citing one grocery chain is a cherry-picked outlier. Cite them all if you want a real number and not an artificial illusion.
If their number is cherry-picked, give a real number yourself. Anecdotally, my grocery bills are easily 30%+ from what they were last year, and the same is true for many people I've asked.
Compare 2022 to 2019 and look for the average change over three years. That's the real signal over the temporary noise. There are still some real effects, but it's much smaller than all the one-year-over-year numbers seem to indicate.
https://www.cargurus.com/Cars/price-trends/
...you can select the start date for the chart as early as August of 2010. Price increases starting in late 2020 don't look illusory to me.
In regard to car prices, I would say that the prices themselves contribute to the inflation statistics, but they are not caused by inflationary pressure.
Recent research illustrates these inflationary-profit trends, in particular busting the myth of a wage-price spiral driven by increased worker incomes. Over 53% of price increases in the last two years have been driven by profit margin gains
https://www.forbes.com/sites/errolschweizer/2022/05/10/how-w...
Inflation is just a rise in prices. Literally just defined as a rise in prices. It doesn't matter if the prices accurately reflect rising costs of doing business or wind up in profits.
Inflation is more about the ability of consumers to continue to pay higher prices and the inelastic demand for whatever the good is. The market is fundamentally an auction and prices get bid up until elastic demand starts to appear.
1) Near zero interest rates during the pandemic - technically set by the Fed, but under obvious political pressure to do it from both the former and current administrations.
2) Helicopter money from the government. I’m not just talking about the one time checks that people use as a strawman to attack as an inflation cause. There were student loan pauses, 300/mo per child credit(they tried to make it permanant!), and more. The fact that much of the money actually went to younger or poorer folks, which we celebrate, probably also drove inflation much more than money going to rich people, because the poor and the young are the most likely to immediately spend it. Lots of pandemic loans given to businesses too with little to no oversight too.
3) Supply side constraints due to shutdowns at suppliers overseas.
4) Demand side rebound demand for things people avoided or weren’t allowed during the pandemic.
Much of this is likely attributable to government policy, so I blame our political class.
In the case of Safeway/Albertsons, they jacked food prices up to make their finances look better for a merger.
Flip side of this would be a subscription company dropping prices (or offering lots of promos) to gain lots of subs before a merger.
You are neglecting that people may not have a choice.
For people w/o cars, they are limited to whatever grocery stores are within walking distance, or accessible by mass transit.
In my case, my easiest choices are the extremely overpriced organic store, Safeway, or QFC. Once Safeway and QFC merge, I'll be down to basically two local choices, and I live in a major metro.
I know people who have one grocery store around them. There are parts of the country[1] where in a ~15+ mile radius you have a single choice for shopping.
Now throw in people who don't have the time, or ability, to commute, and many grocery stores can charge whatever the heck they want up to the limit of what consumers can afford.
https://mobile.twitter.com/moetkacik/status/1580938712740831...
From that thread, yes indeed, the price increase is 76% for 2019 to 2022, but that is (obviously) a completely absurd level of price increases for a 3 year timespan.
And this isn't some unique situation, this is pricing at one of America's largest grocery retailers, a grocery store chain that is the sole grocery store in many communities, and a grocery store chain that is set to soon become much larger.
[1] This isn't unusual, in Washington State if you go outside any major city, you find that smaller cities/towns basically have one Safeway for the surrounding area and that is it. Visiting friends on the east coast, I noticed a similar situation, a cluster of small towns and a single grocery store (Kroger owned).
This is a very specific claim to be completely unsourced. What is the chain, and what is the time period you are referring to?
The latest CPI [0] has food prices up 11.2% over the past 12 months, so 48% would be more than just an outlier.
Also inflation is hardly a few percentage points of catch up. Look at the chart below and tell me you still believe that.
https://www.bls.gov/charts/consumer-price-index/consumer-pri...
Not to mention food/gas is worse which is what hits people in low to mid income ranges the most.
I just heard a report this morning that there was a very real labor participation rate drop among women, particularly with working mothers. How does your immigration hypothesis align with that? Is it that child care work is primarily driven by immigrant workers? Or is it that other groups more than make up for that in the general statistic?
That's roughly double the Fed target rate — annualized 3.8%, which would be the highest any year save 2008, which was itself an anomaly due to the GFC. The last time inflation exceeded 3.5%, save 2008, was in 1991. So 12% in three years is in no sense normal (for the USA).
The inflation is real, and it's serious. It's actually produced a reduction in real wages [1] despite much excitement about workers' bargaining power. Progressives complaining about the Fed (which is finally reacting reasonably) seem to be missing that preventing a wage–price spiral is not the same thing as union-busting.
Finally, it's not even 12% -- if you look at the 3 year chart here, it's 16% over 3 years, even less normal:
While it may not be here now, we probably have more foresight into the fact that there will be a recession than ever before.
The Fed will intentionally create one to stop inflation, despite their talk of soft landing. The only hope otherwise is that inflation subsides on its own, which, given labor dynamics, is looking increasingly unlikely.
So the Fed has to choose between spiking unemployment to contain inflation, or letting inflation run wild. Powell doesn’t intend to be remembered as an Arthur Burns, so it seems most likely he will keep pressing until the recession comes.
Eventually stock prices will come down enough, and debt costs rise enough to actually cause the layoffs they need to pivot.
Final note that, due to public sector debt levels, we cannot choose a path of allowing moderately high inflation for a long period of time. The government budget will become insolvent without a mechanism to fund it, either at the short or long end of the yield curve. Or in short, either we need a quick and sharp recession, or the Fed to give up on the inflation fight so they can drop short end rates and let govt debt inflate away.
Otherwise the US govt will default within a few years.
Those W2 employees are expensive recurring liabilities to the companies employing them. This expense can be offset in various ways (R&D credits, cheap money, endless VS cash, public statements about "always growing", other stuff I don't know about I'm sure). However, when the cracks in the system begin to show companies need to accomplish at least a couple of things: reduce recurring expenses and maintain an image of success (publicly traded or not!) despite the headwinds.
Now, one way to accomplish those goals might be to join in with your fellow "biz leaders" and make statements about an upcoming recession and hard times, etc. This allows you to blend in with the crowd rather than be "that one company that is maybe failing". Once the blending in step is accomplished it leads into being able to start reducing headcount without freaking out too many people (it's not just Meta, it's everyone!).
> ...I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market.
Also, yeah, I've toyed with this idea too. After many years of pay band compression recent years have shown (for at least software engineers) that it's possible to individually negotiate up quite a bit. If you are qualified and can communicate that clearly, then you are in for a big raise or three. Until recently, even if you weren't particularly qualified you could still do this. This knowledge has spread pretty widely. Obviously capital doesn't like it when labor can say "Screw it, I'm out. 'Gonna go get a big raise instead of stick around and deal with X". This could indeed be the opportunity that capital was waiting for to readjust those dynamics again.
"The Recession" was a convenient reason for them to trim ineffective or unnecessary staff.
It's exactly this and actions/comments from CEOs and the Fed pretty much confirm it. When Powell said "economic pain" was necessary, he meant that mostly for the working class. Look at all the layoffs going on...
By driving up unemployment, the Fed expected “supply and demand conditions in the labor market to come into better balance over time, easing the upward pressure on wages
That's not what I'm seeing. There's a good summary from earlier this week at https://seekingalpha.com/article/4548245-weekly-indicators-s...
Employment is the only indicator that is still positive, everything else is either neutral or pointing to a recession.