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Peter Schiff: Inflation Is Crushing Working- & Middle-Class Americans’ Quality Of Life

Peter Schiff: Inflation Is Crushing Working- & Middle-Class Americans’ Quality Of Life

Via SchiffGold.com,

Despite government officials…

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This article was originally published by Zero Hedge

Peter Schiff: Inflation Is Crushing Working- & Middle-Class Americans’ Quality Of Life

Via SchiffGold.com,

Despite government officials and central bankers continuing to peddle the “transitory” inflation narrative, the average American isn’t buying it. They feel the squeeze of rising prices in their wallets. And it’s the average American who is hurt particularly hard by the skyrocketing cost of living. Peter Schiff appeared on the Megyn Kelly show to talk about how inflation really hurts working and middle-class Americans.

Even as inflation rises, the Biden administration continues to spend money at a torrid pace. The borrowing and spending will only increase inflationary pressures. Administration officials claim the “the rich” will pay for all of the spending, but as Peter pointed out, this simply isn’t true.

In fact, a lot of people who are rich end up benefitting from inflation because inflation also pushes up the value of assets that a lot of rich people own. But unfortunately, a lot of middle-class Americans don’t own those assets. They just get stuck with the bill. They earn wages, but their wages don’t rise nearly as much as the cost of living. And so, even though they get a bigger paycheck, they’re actually earning less, because when they go to spend those dollars, they can’t buy nearly as much stuff.”

Peter said that’s why inflation is the worst way to pay for government.

It’s the most regressive form of taxation. It hits hardest those who could least afford to pay. That is the biggest problem because Biden wants to pretend we’re getting all this government for free. Nothing is free — especially government. And whenever the government pretends you’re getting something for nothing, it’s a lie. They’re just trying to win your vote. But then you don’t realize that they’re buying your vote with your own money.”

Megyn asked Peter to explain the recently announced Fed taper. Should we be glad the central bank is going to buy fewer bonds?

Peter said they shouldn’t be buying any Treasury bonds to begin with.

That is part of the problem. They never should have bought any bonds. That was quantitative easing. But that is the mechanism for creating inflation. They print money and then they buy government bonds.”

Peter said he has a hard time believing the Fed will be able to live up to its commitment to the taper.

As the US government increases spending — and we know we’re going to get this infrastructure bill. We’re going to get this “build back better” bill. They’re going to get passed. There’s not going to be nearly enough tax increases to cover the cost. So, the Federal Reserve is going to end up buying even more bonds. Even if it’s saying it’s going to buy less, it’s going to end up buying even more because that’s the only way to pay for all the spending.”

And Peter emphasized all of these spending plans will end up costing more than the government initially claims.

Megyn summed it up — the government won’t be able to tax Jeff Bezos enough to pay for all of this spending. It won’t even be able to tax the average American enough. So, it will have to turn to the Fed for more quantitative easing and money printing to pay for it. That will mean even higher inflation.

Peter emphasized that the true cost of government is what it spends – not what it collects in taxes.

Every dollar of government spending needs to be paid for. And so, if it’s not paid for through taxation, it’s paid for through some other means, and that is inflation. And just because the Federal Reserve prints money and gives it to the government to spend, it doesn’t mean that we’re getting all that spending for free. We’re going to pay much higher prices for consumer goods. And that means Americans are going to have to reduce their spending because everything is going to cost a lot more. And since we don’t have an unlimited amount of money people are going to buy a lot less, which is exactly what would happen if their taxes went up.”

Megyn used her 80-year-old mom as an example. Her mother is on a fixed income and it doesn’t go up. She is the kind of person who is pinched by increased prices. Peter agreed, saying people on a fixed income are hit particularly hard by inflation.

If you’re younger and you still have a job, you can at least recover some of the inflation with higher wages. … It may not be enough to completely offset the increase, but at least you get some of it back. But if you’re retired and you’re living on a fixed income, that income is not going up. But your cost of living is. And so, it’s particularly troublesome for older retired people like your mom. And I think a lot of Americans who are preparing to retire now are going to have to rethink their plans. Because there’s no way the money that they’ve saved and the income streams that they anticipate receiving are going to be sufficient given the much higher cost of living that we’re going to be experiencing. And this is not just going to be a few percent a year. We’re talking double-digit increases in the cost of living for many, many years in a row. … So if your income stream doesn’t keep up, you’re getting poorer.

Tyler Durden
Wed, 11/10/2021 – 11:25






Author: Tyler Durden

Economics

Unemployment Falls to 4.2 Percent in November as Economy Adds 210,000 Jobs

The rise in the index of aggregate hours would be equivalent to more than 630,000 jobs with no changes in workweeks.
The post Unemployment Falls to 4.2…

The rise in the index of aggregate hours would be equivalent to more than 630,000 jobs with no changes in workweeks.

The unemployment rate fell 0.4 percentage points in November, even though the economy added just 210,000 jobs. The drop in the unemployment rate went along with an increase in the employment-to-population ratio (EPOP) of 0.4 percentage points, corresponding to a rise in employment of more than 1.1 million in the household survey. The unemployment rate had not fallen this low following the Great Recession until September 2017.

The 210,000 job growth in the establishment survey is slower than generally expected, but it is important to note that it went along with an increase in the average workweek. The index of aggregate hours in the private sector increased by 0.5 percent in November. This would be the equivalent of more than 630,000 new jobs, with no change in the workweek.

This fits a story where employers are increasing hours since they are unable to hire new workers. We are seeing a reshuffling of the labor market where workers are looking for better jobs and employers are competing to attract workers, especially in lower paying sectors.

Declines in Unemployment Largest for Disadvantaged Groups

Nearly every demographic group saw a drop in unemployment in November, but the falls were largest for the groups that face labor market discrimination. The unemployment rate for Blacks fell by 1.2 percentage points to 6.7 percent, a level not reached following the Great Recession until March 2018 and never prior to that time. For Hispanics, the decline was 0.7 percentage points to 5.2 percent.

The unemployment rate for workers without a high school degree fell by 1.7 percentage points to 5.7 percent. By contrast, the unemployment rate for college grads fell by just 0.1 percentage points to 2.3 percent, 0.4 percentage points above its pre-pandemic low. The 5.7 percent rate for workers without a high school degree is 0.7 percentage points above the pre-pandemic low, although the monthly data are highly erratic.

The unemployment rate for people with a disability fell by 1.4 percentage points to 7.7 percent, while the EPOP rose by 1.1 percentage points to 21.5 percent. The latter figure is almost 2.0 percentage points above pre-pandemic peaks, indicating that the pandemic may have created new opportunities for people with a disability.

Share of Long-Term Unemployment Edges Up

The share of workers reporting they have been unemployed more than 26 weeks edged up slightly to 32.1 percent. It had been falling rapidly from a peak of 43.4 percent in March. It was under 20.0 percent before the pandemic hit. On the plus side, the share of unemployment due to voluntary quits increased by 1.0 percentage points to 12.5 percent. This share is still low for a 4.2 percent unemployment rate, but the high share of long-term unemployed depresses the share attributable to quits.

Wage Growth Still Strong for Lower Paid Workers

The average hourly pay of production workers is up 5.9 percent year-over-year. It has risen at a 6.6 percent annual rate comparing the last three months (September to November) with the prior three months (June to August). For restaurant workers the gains have been even larger, with the average hourly wage for production workers up 13.4 percent year-over-year, although the annual rate of growth slowed to 5.7 percent comparing the last three months with prior three months. Wages for the lowest paid workers are far outpacing inflation.

Manufacturing and Construction Both Add 31,000 Jobs in November

This continues a pattern of strong job growth in these sectors. Employment in construction is now down 1.5 percent from pre-pandemic levels, while manufacturing employment is down 2.0 percent.

Employment Lagging in Hard Hit Sectors

By contrast, employment is still lagging in the hardest hit sectors. The motion picture industry shed 3,400 jobs in November. It is now down 21.9 percent from pre-pandemic level.

Low-wage sectors are clearly having trouble attracting workers. Nursing and residential care facilities shed 11,000 jobs in November. Employment is now down 423,700 jobs (12.5 percent) from pre-recession level, accounting for most of the drop in health care employment. Childcare lost 2,100 in November, while home health care lost 300 jobs.

Retail lost 20,400 jobs in November. Employment in the sector is now down 1.1 percent from pre-pandemic levels; although the index of aggregate hours is up 1.1 percent.

Restaurants added just 11,000 workers, while hotels added 6,600. However, the index of aggregate hours for the leisure and hospitality sector (which comprises the two industries) rose 0.6 percent. This corresponds to a gain of almost 800,000 jobs with no change in the length of the workweek.

State and Local Governments Shed Another 27,000 Jobs

State and local government employment is now down 951,000, or 4.8 percent from pre-pandemic levels. This is almost certainly a supply side story, where these governments cannot easily raise pay to compete with the private sector in attracting workers.

Overwhelmingly Positive Report

This is another overwhelmingly positive report. The unemployment rate is more than a full percentage point lower than what CBO had projected before the passage of the American Recovery Plan. The most disadvantaged workers are seeing the greatest benefits in pay and employment opportunities. The economy looks to be very strong as long as another surge in the pandemic doesn’t derail it.

CEPR produces same-day analyses of government data on employment, inflation, GDP and other topics.
Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.
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The post Unemployment Falls to 4.2 Percent in November as Economy Adds 210,000 Jobs appeared first on Center for Economic and Policy Research.


Author: Karen Conner

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Economics

NFP React: Stocks lower after soft NFP report and Omicron jitters, No one named an FX manipulator

US stocks declined after a soft employment report and as traders remain on edge over the uncertainty with the Omicron variant. The next couple of weeks…

US stocks declined after a soft employment report and as traders remain on edge over the uncertainty with the Omicron variant. The next couple of weeks will remain volatile as the focus falls on the latest inflation report, the December 15th FOMC meeting, and further clarity on the impact with the Omicron variant. 

A record ISM Services reading did not excite traders, perhaps they focused more so on the supplier deliver delays, wage increases, and labor shortages. Technology stocks are getting hit hard as Facebook, Microsoft, and Square sell-off.  Didi shares fell on delisting plans and that raised the risk that other Chinese companies would follow.  

NFP

The US economy is adding jobs at a slower pace as employers are starting to have success luring people back to the labor force. If wages continue to rise, that will be the key for companies to reach their hiring targets. 

The November employment report showed US employers added 210,000 jobs, a miss of the 550,000 consensus estimate and well below the upwardly revised prior reading of 546,000 jobs. A headline miss with the nonfarm payroll report, may be mostly attributed to seasonal factors. The underlying components make this labor market report not so bad as people are coming back to the labor force, with the participation rate improving from 61.6% to 61.8%.

Wage pressures may be slowing as average hourly earnings dipped in November from 0.4% to 0.3%, but some of that could be attributed to the weakness in lower paying hospitality jobs. 

The Fed may view this as a positive employment report as minority unemployment improved significantly and the participation rate is now only 1.5 percentage points lower than in February 2020. Fed rate hike expectations are settling around two rate hikes next year. The headline jobs miss takes away momentum from an accelerated tapering but allows them to increase the taper pace by $5-10billion to the monthly pace. 

FX

The Treasury has placed 12 countries on a foreign exchange watchlist, bringing back China to the list, while adding Japan, Switzerland, and Germany.  The Treasury refrained from calling any country a currency manipulator, but both Vietnam and Taiwan will get enhanced analysis.


Author: Ed Moya

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Economics

Commodities and Cryptos: Oil rallies, Gold holds onto gains post NFP, Bitcoin hovers

Oil Crude prices extended gains after a mixed payroll report showed the labor market recovery is moderating but still headed in the right direction. …

Oil

Crude prices extended gains after a mixed payroll report showed the labor market recovery is moderating but still headed in the right direction.  The Omicron variant continues to be the key to short-term crude demand outlook and the latest updates have been mixed.  A South African study showed that Omicron reinfection risk is 3X higher.  The study of 2.8 million positive COVID samples in South Africa showed the Omicron mutation has a substantial ability to evade immunity from prior infection.  As Omicron spreads across the US, energy traders can’t forget about Delta as hospital admissions are increasing across 39 states. 

The aftermath of the OPEC+ meeting on output has many traders believe that if Omicron poses a bigger risk to the short-term crude demand, that would be met with a quick response of production cuts.  

Gold

Gold prices initially popped after a big headline jobs miss lowered the chances that the Fed would double the taper speed at the December 15th FOMC meeting, which would also push back expectations for that first Fed rate hike.  After traders processed the entire employment report, they realized it was not as bad since the participation rate rose sharply with both black and Hispanic unemployment also improved significantly.

Gold is still near one-month lows as markets continue to anticipate two Fed rate hikes next year, which should keep the dollar in demand.  Even as the Fed seems poised to wrap up tapering around the start of the first quarter, traders are not confident on when real yields will turn positive and that should be a primary driver for gold to rally after Wall Street confidently fully prices in the first couple of Fed rate hikes.  Leading up to the December 15th FOMC decision, gold should consolidate between $1750 and $1800 as next week’s inflation report doesn’t come with an extremely hot inflation report that includes a reading of 7% or higher. 

Bitcoin

Bitcoin is in ‘no man’s land’ right now and that does not seem to be changing anytime soon.  The long-term bullish case remains intact but prices seem poised to consolidate between $52,000 and $60,000.






Author: Ed Moya

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