The BLS Payroll Report was issued today showing 136,000 new jobs. Of this perhaps 100,000 are needed for population increase, thus the real net gain was about 36,000 which is almost nothing out of a work force (total seeking or holding jobs) of 160 million.
Job growth is not occurring in prime aged males, thus risk that growth is in low paid jobs held by other groups; growth of low wage jobs not inflationary at this point because these job increases mostly went to high school drop outs. The least skilled sector of society have many problems like no reserves, no 24 month job history, bad credit, etc. so they can’t qualify for an A paper loan that increases the money supply and thus can’t cause inflation.
Non-employed prime age men went from 5% of population during 1960’s booms to 10% in 2000 and now 13%, so that segment is 3% worse than 20 years ago and 13% worse than the 1960’s.
There is a mirror-like symmetry between rich beneficiaries of QE not causing inflation because the QE simply goes into asset bubbles and the newly employed minimum wage workers whose new job can’t cause inflation because the worker has too many problems to qualify for a loan; also his expenditures would be focused on low margin commodities/cheap Walmart type of goods (where there is plenty of global capacity) rather than engaging in a bidding war for middle-priced quality goods.
To create inflation the economy needs to have most of the job creation occur in good paying blue collar jobs with a stronger reduction in unemployment among prime age males. Wage gains need to be at least 2% above inflation and the rate of gains should be increasing just as if you were watching an emotional auction where some bidders keep raising the price. The last year of a long expansion usually has an employment bidding war with wages rising at an increasing pace. Instead good jobs are lost and replaced with lower paying dead-end “jobs”. Thus inflation isn’t the problem.
Investors need independent financial advice about the risks of inflation.