Fed Chair Powell does not understand the relationship between Federal welfare (“stimulus”) programs and wage inflation.
Per Fed Chair Powell’s prepared remarks on Wednesday, Mr. Powell seems completely oblivious to the fact that fiscal “stimulus” programs are counterproductive to low-wage services sector employment. For example, Powell commented that he was concerned by the “level of joblessness among low-wage services workers”. These workers are collecting both state unemployment benefits as well as Federal unemployment benefits paid out by the Pandemic Emergency Unemployment Compensation program (“PEUC”). PEUC pays out $300 per week. This program has been extended until September 6th 2021 (and may be extended beyond that date). While many expect Federal unemployment benefits to go away post September 6th I’m not willing to take that bet. Not with mid-term elections around the corner. Powell will come under immense political pressure to continue to subsidize fiscal spending (Biden’s tax proposals are but a drop in the fiscal spending bucket). Therefore, I believe the Federal Government will continue to compete with American businesses for workers for the foreseeable future, thereby exacerbating wage inflation and “joblessness” (to the extent that is a word).
Related TEK2day articles and podcasts are below:
- Podcast: Ep. 422: Biden’s $1.8 Trillion Spending Program Will Further Tax Americans Via Inflation
- Podcast: Ep. 421: Significant Tech Valuation Downside Risk Due To Higher Tax Rates
- Podcast: Ep. 420: Enhanced Unemployment Benefits Are Hurting Retailers
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- Article: Biden’s Climate Plan Is A Tax On Companies And Individuals
- Article: The Fed’s Vicious Cycle and Gold
- Article: Enhanced Unemployment Benefits Are Hurting Retailers
- Article: A Breakdown of Biden’s $2.3 Trillion Green New Deal