Tuesday, March 20, 2018

Is Inflation on the Horizon?

After years of slow growth, high unemployment and a stagnant economy things are beginning to change.  The rate of economic growth is increasing, more people are finding jobs and employers are beginning to increase wages are among the many signs the economy is finally rebounding.

The decline in unemployment is a very positive sign as is the fact that employers are finally beginning to increase wages.  Employers don't raise the pay of their employees out of the goodness of their hearts.  Instead, they raise wages to try to both retain current employees as well as recruit new employees. 

Unlike the depths of the past recession when employers cut costs by not replacing employees who died or quit.  Now employers are raising wages to encourage current employees to stay and not quit.  Raising wages are also an attempt to recruit new employees to fill the new positions being created.  When an employer advertises a job opening and 300 people apply there is no need to try to encourage more to apply by raising wages.  However, when an employer advertises a position and only a few apply with most being unfit for the position wages have to be increased in order to not only encourage more to apply but to also encourage more qualified people to apply.

So, after years of economic stagnation the economic growth we are seeing is very good news.

However, there is some potentially bad news.  Increasing wages will cause expenses and prices to increase somewhat.  This is especially true if employers begin competing against each other for a shrinking supply of qualified workers.  This bidding war for workers can result in rising prices and inflation as employers compete for the finite supply of workers.

However, there is a possible buffer in the form of people who have left the labor force and are no longer counted as unemployed.  Monthly reporting of unemployment shows declining percentages of those unemployed and as the unemployment rate approaches 3% and lower the threat of rising inflation is a real fear.

However, the official unemployment figures only count people who are both out of work AND are actively looking for work.  Those who have lost their jobs and have given up looking because there are no jobs are not included in the unemployment figures.

Many people became discouraged and quit looking for work during the recession.  They live off of savings, borrowing, taking reduced early retirement pensions and Social Security, a spouses income, public welfare, etc.  While unemployed, this group is not homeless or starving but many will not see a benefit in going to work just to receive an income that is no more than what they are receiving by not working.  These people are not necessarily lazy and many are keeping busy taking care of children or grandchildren, going back to school, volunteering or other worthwhile activities that allow them to be productive and give them satisfaction.

However, rising wages change the equation by offering the chance to earn more than they are earning now.  The flow of these workers back into the workforce will both tend to keep wages from becoming inflationary as well as increase output which will satisfy consumers needs without them having to get into bidding wars to obtain the goods and services they seek. 

Tuesday, March 13, 2018

Americans Projected to Spend $5.9 BILLION Celebrating St. Patrick's Day

Since ancient times holidays and festivals have brought people together to celebrate.  The togetherness and celebratory  mood have also attracted merchants to the celebrations hoping to cash in on the celebration.

In the U.S. Christmas has long been the premier holiday for merchant sales.  But other holidays - Halloween, Valentine's Day and Easter, have also resulted in major increases in retail sales.  While not as big as Christmas, St. Patrick's Day has been another holiday in which merchants in recent years have seen a sales bump.  

St. Patrick's Day 2018 is projected to be a very good year because it falls on a Saturday which means that for most people it is a day off as well.  Since the next day, Sunday, is also not a work day for many, people can stay out celebrating and spending more money until late in the night.  According to the National Retail Federation St. Patrick's Day spending should reach $5.9 Billion dollars.

Despite the fact that St. Patrick's Day has long been associated with consumption of alcohol and bars being the major beneficiaries of the holiday's spending, 50% of those surveyed indicated that they would be purchasing food with only 41% planning on purchasing alcohol.  Food sales would include spending in restaurants as well as grocery stores for those planning on parties in their homes.  Beverage sales would include purchases in

Even Pets Get Into the Holiday
(Photo Copyright © 2009 by Chuck Nugent)

bars and restaurants as well as in liquor and grocery stores for those dining or partying at home.  The beverage category probably includes non-alcoholic as well as alcoholic beverages.  Other planned purchases include St. Patrick's Day apparel, for both humans and pets (31%), decorations (26%) and candy (16%).  Obviously many people indicated plans to purchase one category items.  Candy and apparel appear to appeal mainly to younger buyers (18-24 age group).

Irish have been coming to America since colonial times and have been a major demographic group in the United States.  Currently about 33 million Americans representing 10.5% of the population (as of 2013) claim Irish descent.  If you add in those of Scot-Irish descent (i.e., those who ancestors came from the Protestant Northern Ireland) the number becomes larger.  Also, due to intermarriage, many people check the box for the ethnic group of another part of their family. 

Former President Barack Obama is considered to be of Black or African ancestry but is half-Irish on his mother's side.  Then there are Americans of Hispanic and Mexican decent with Irish last names.  Many Irish left Ireland in the 17th and 18th centuries for Spain and many then moved on to Mexico and what is now the American southwest.  While they still have the Irish surname they probably consider themselves Hispanic rather than Irish.

Finally, when it comes to listing Presidents of Irish ancestry (a category that includes both Irish and Scot Irish) 22 American Presidents from Andrew Jackson, the 7th President of the U.S. to Barack Obama, 44th President of the U.S., almost half of them in our 242 years as an independent nation have been of Irish ancestry.

However, on March 17th, St. Patrick's Day, everyone claims to be Irish even if it is only for that day.  And, the nation's retailers are more than happy with the flood of green dollars that flow into their cash registers from all their "Irish for a Day" customers.













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