My wife just emailed me the picture below. At first I thought she was sending it in support of my last article on inflation, but then I realized she was actually encouraging me to get a job!
I remember some long hours in the office when I was an analyst/portfolio manager. My boss would joke that he’d be happy to slide TV dinners under my door if I didn’t want to leave.
It’s interesting. As analysts and managers, sometimes we sit in our offices reading for hours and hours attempting to figure out our investment and economic worlds. Meanwhile, the answers are often not in the piles of data and research stacked on our desks, but right outside waiting for us to simply look up and acknowledge.
For example, during the housing bubble, all you needed to do in Florida was go for a short walk or drive and count the number of new condo buildings and neighborhoods being constructed. The unsustainable excesses in credit were right outside for all to see. It was not only obvious in hindsight, but in real time.
I believe the same can be said for the labor market today. As stated in my previous post, and based on my bottom-up research, I’m noticing growing signs of a tight labor market and rising wages. If government data isn’t picking this up — making it difficult for many investors and economists to identify — maybe it’s time to step out of the office (or immaculate Federal Reserve building) and go for a walk to observe.
While the central banks may still have control of the bond and stock markets, the labor market appears to be functioning freely, with supply and demand pushing wages higher. As such, in my opinion, new labor laws requiring an increase in the minimum wage are unnecessary.
Locally, it’s clear the market price for entry-level employees is well over Florida’s $8.10 an hour mandate. Chick-fil-A isn’t alone. There are many companies being forced to pay higher wages to fill positions. Remember, just a few weeks ago Target (TGT) increased its minimum pay to $11 an hour. I suspect this move wasn’t out of generosity, but out of necessity.
So go for a walk or drive and see for yourself. Talk to mangers and business owners attempting to fill positions with qualified employees. When you return to the office and review macro statistics suggesting wage inflation remains subdued, ask yourself if the numbers agree with your observations and conversations.
Article by Absolute Return Investing with Eric Cinnamond
