Inflation Is Here.. Get Used To It!

Via Global Macro Monitor,

I stopped to grab a burger in Marin County today and was kind of shocked to see the following posted on the front door...

That is a pretty steep starting wage for non-skilled labor, and $5.00 more than the California minimum wage.

In-N-Out does pay their employees well.  The private burger chain pays store managers an average yearly salary of more than $160,000 with no college degree or previous management experience required.   Facebook engineers soon to be flipping burgers.

Nonbinding

It is clear the minimum wage in California is nonbinding — that is irrelevant — and all the bluster about raising it would cause unemployment is just that, bluster.

During softer economic times, when the minimum wage is binding, the story changes.  Not now, however.

Passing It On

Nevertheless,  it did feel prices have risen for a burger, fries, and soda since the last time I was in an In-N-Out.  I think it cost me around $8.50 today.

Does anyone remember the days of a $.35 Big Mac?

Real Minimum Wage Higher 

Here is what is interesting about that $16.00 per hour offer.

In 1980, the minimum wage was $3.10 per hour, which equates to $9.94 in today’s inflation-adjusted dollars.    The minimum wage is $11.00 in California, so a slight increase in the real wage.

If In-N-Out is forced to pay almost 50 percent above that to attract decent burger flippers and the company can pass it on in higher prices,  inflation cometh is here, folks.

Other firms will have to pay higher wages to keep and attract their workers if In-N-Out is going to start bidding up the labor market.

We are happy for the entry-level workers, high school, and college kids that now have a higher return on their labor.   However, that is only half the story.

Many of the lower paid workers are not entry-level.

Some,  reemployed from much higher paying jobs, some are seniors who cannot afford retirement.

We suspect, though wages are raging at the lower end,  companies are laying off older expensive workers and hiring younger cheaper workers to keep labor costs in check, and is one reason why the official wage numbers are not spiking.   We are not certain on this and have to further research it.

Wealth Gap

We haven’t even discussed the pornographic income and wealth gaps,  and will leave that for another day.

But just imagine, if you will,  the inflationary pressures the economy would be experiencing if a decent chunk of the income and wealth generated over the past ten years actually had found its way to those with higher propensities to consume?

Wealth Without Production = Inflation 

If wealth without work is one of Ghandi’s  seven deadly sins, paper wealth without production that is consumed is surely inflationary.  Go no further than than the real estate market to confirm this thesis.

How ironic it is the global central banks that have printed trillions over the last decade to generate the asset inflation to stimulate demand to keep the global economy afloat have not suffered the inflationary consequences of their actions.  At least, not yet.

The rich have become richer and spend proportionally less, and the poor have become poorer and cannot spend more.

Inflation

Rents and housing prices are skyrocketing, though maybe not in Manhattan.

Food prices are rising.

Gas prices are spiking.

My Verizon bill suddenly spiked $150 per month with new surcharges, so off to Sprint.

Moreover, there is no labor to rebuild the housing market in our fire-ravaged county.

So, of course, there is no inflation.

And how the heck do you correctly measure inflation with dynamic pricing anyway?

Do you have any question the methodology the BLS will or is using?

The Disneyland resort raised prices over the weekend, several months before the park plans to unveil a remake of its boardwalk-themed area at the California Adventure Park.

The prices rose the highest for annual pass holders, up as much as 18%. Daily tickets rose nearly 9%. By comparison, the consumer price index rose 2.5% in the 12 months ending January 2017.

Daily tickets for the Anaheim theme parks vary in price, depending on daily demand.A one-day, one-park adult ticket for Disneyland or California Adventure remains $97 for low-demand days, such as weekdays in May.

A ticket for regular-demand days is $117, up from $110. The price of a ticket on peak-demand days is $135, up from $124.  – LA Times,  Feb 11, 2018

Spiking Bond Yields

Why would bond traders ever bid the 10-year over 3 percent?

Sometimes the crowded trades are right.   Higher deficits,  the Fed now a yuuge net Treasury seller, and foreign buyers on strike, and then higher inflation.

Flatter yield curve?

Good luck on that one unless the stock market suffers a 1987-like crash.

Comments

pods zero_pussy Wed, 04/25/2018 - 12:29 Permalink

Any inflation article that uses CPI makes my ass pucker.

CPI is a government tool to keep COLA raises small and let the Feds and FED keep borrowing and printing.

Inflation is that feeling you get when you look at your budget and realize that last year was easier.

Just got my raise for the year. Seems they like me, but not as much as last year, which was less than the year before, etc.

At least my other shit is going well.  Time to inflation adjust my output.

Fuck the career.

pods

In reply to by zero_pussy

D503 TheBlaze Wed, 04/25/2018 - 14:25 Permalink

"The median home value in Marin County is $1,102,353. Marin County home values have gone up 8.2% over the past year and Zillow predicts they will rise 4.9% within the next year." -Zillow

1,102,353/16=68,897 hours,

or 8,612 eight hour shifts,

or twenty three and a half years, working eight hours, every day, no days off (paid vacations?), to earn the average home in the county.

Working only five days a week would take over thirty years...with no other expense. 

You see? The fucking number associated with the hour means nothing. The change in that number means a LOT to a stupid debt slave though. Hence this article.

In reply to by TheBlaze

Endgame Napoleon Juggernaut x2 Wed, 04/25/2018 - 14:18 Permalink

Looking at job ads around the country in places where rent is not quite as high, though still high enough to consume more than half of earned-only income for single citizens with no kids who have higher withholding and no access to unearned income from government, I notice the same $10 to $13-per-hour wage levels for office jobs, where moms with spousal income, moms with child support that covers rent and moms with free groceries, free rent, free electricity, free monthly cash assistance and EITC refundable child tax credits up to $6,431 camp out. 

These jobs are often part time, keeping the womb productive under the earned-income limits for welfare. Some of these jobs require multi licenses, according to the state which charges me for mine, although the non-straight-commission jobs are often, in reality, staffed with unlicensed moms who enjoy copious absenteeism privileges. I see a lot of low-wage office job ads for Spanish speakers. 

That company pays a ton, compared to the vast majority of office jobs, including many office jobs dominated by college grads, like quite a few low-wage corporate back-office jobs and the state job I worked at the Department of Human Services, which paid $12 per hour ($25k).

Pension or not, government workers would be fools not to jump on those $160k fast-food management jobs, albeit government workers get paid a LOT more in CA, whereas in the South they do not and are often minorities in minority-dominated state office jobs or married moms, adding another job with benefits to a spouse’s better-paying job with benefits.

In reply to by Juggernaut x2

Endgame Napoleon j0nx Wed, 04/25/2018 - 14:31 Permalink

Bezos needs to raise wages, letting elites who do not want to fight the traffic to shop in retail stores pay for shipping. Everyone else has to pay more to get a service, and people who get to work at home, where they are in a position to receive packages, are usually getting paid a lot with spousal income on top of it.

In reply to by j0nx

Wild tree hedgeless_horseman Wed, 04/25/2018 - 15:09 Permalink

True that HH, and to answer those who ask what would make those dollars come cascading home:

https://www.rt.com/business/422314-petro-yuan-futures-dollar-death/

Never a dull moment in our apoplectic land, though I could use some dull days myself. Have you seen those videos when some farmer removes one rock to many from a silo??? Same thing here.

In reply to by hedgeless_horseman

Dilluminati MonsterSchmuck Wed, 04/25/2018 - 12:12 Permalink

https://quotes.wsj.com/futures/GOLD

when (inflation goes up)

{

The consumer will be (and has been) facing elevated borrowing costs as well in the form of mortgage rates, consumer loans, etc. – which eats into wallet-share; a particularly troubling  development for an economy that is ~70% consumption.

}

ergo no money to buy gold

ergo stagflation

ergo stagflation = collapsing wealth = debt deflation as borrowing is more expensive 

In reply to by MonsterSchmuck

TrumpXVI pods Wed, 04/25/2018 - 13:09 Permalink

I’m not laughing at you pods.
I agree with you.

And I think the inflation thing is incorrectly defined and poorly understood.
There have been price and value increases in the things that are supported by Fed policy and money printing; house prices, health care, higher education, the equity market.
But one thing I know for sure. MY weekly grocery budget of $80 has NOT changed in over 10 years. Like it or not, THAT is a fact. And I haven’t changed squat in my shopping habits.

In reply to by pods

Dilluminati pods Wed, 04/25/2018 - 14:35 Permalink

I was looking at some 10 year at close to %2.9 and in year 8.  The trade display was red and indicating a negative loss as the bid on that note was under dollar.  So I took the last year returns and bought at the 5, stacked.. where the real danger is at is having allot of money and getting caught in a wealth loss event like XMAS in Japan.

After reaching a peak of 38,916 points in late 1989, the main Japanese stock market began to plunge. As Vaclav Smil recalls, "The index was below 25,000 by November 1990 (losing nearly 40 percent in 1990); the first dip below 20,000 came in March 1992; the 15,000 level was broken in June 1995; and the first slip below 10,000 came in September 2001."

It is at 22,215 at time of this post.

This is as much about age demographics as anything.  But most people don't get the risks and look at their statements and think: wealth affect.. wow I'm doing OK or wow.. doing bad.  

But as the interest rate increases wind their way through to the consumer the housing will slow, autos will slow, in general inflation or debt-servicing will tilt towards cuts.

Now I grant you this isn't sexy however it is sane!!!

If you are say 50 years old and can afford to lose close to 50% of your savings in the market, well go ahead and do it.  That same person in Japan was 50 and is now 78 years old and still hasn't seen that money back. (nor the dividends on dividends) If you bought allot of Gold at 1,800/oz and you know there were buyers through 1,600 and 1,700 you need a snickers bar.

I don't get wound up on that short term illusion that I'm not getting 2.89% and will hold to maturity, I'll load up on shorter higher rates bought off of interest paid.. when the rates start to go down.. I'll wade into some rotational sectors transportation and shipping that are cyclical also.

My age and societal demographics makes me want to walk with the money.  Give me the money and lets see how this works out?  The USA dollar and economics is a fixed game and I know that.. I also know that the US dollar is the least dirty shirt in the basket.

Wait until "too many debts chase too few dollars" and the increase in credit card debt servicing costs and housing debt servicing costs here will be soon enough..   I'm also watching the people and their mortgage deductions.. this tax cut thing, not set in stone.

Non-callable, SIPCA, FDIC, give me the money.. I want mine

 

In reply to by pods

horse cents Dilluminati Wed, 04/25/2018 - 20:35 Permalink

I had to read your post again. You made a case for buying treasuries. Yet you really bought the 8 year strip? My old man bought the 28th year in 1982 but he had a PHD in statistics.. I see your logic. What if #Martin Armstrong is right? Wealth loss event is correct. Christmas in Japan created a big crowd in the suicide forest. How do you hedge a position like that?

In reply to by Dilluminati

Dilluminati MonsterSchmuck Wed, 04/25/2018 - 14:47 Permalink

I actually do stack some silver but as a prepper.. here is a coin I want this or that theoretically, I actually spoke to a private butcher shop and offered silver barter.. (just this last thanksgiving) the guy was Mennonite.. he was so thin in margin.. new store, buy sell agreement with family, next generation, ec., he didn't "get it" nor did he have the cash flow to facilitate the other side of the trade.  I was going to offer essentially $100 in silver at spot for a Turkey, these are seasonal, all natural, Amish birds, fresh must be bought in advance, and I wanted to cultivate the relationship with a butcher.  The guys margin so thin, sooo busy, didn't show any interest and I wanted to pay the premium to establish the relationship.  Without BS when was the last fungible asset you traded or bought with silver?  I offered 6 oz's and the bird was $70, it just seemed like an inconvenience to the guy as he wanted cash and no problems.

Same goes with the cryptos.. but if you do have vendors food and such for the coins good for you, but going in and asking the store manager at some mega-corp to take silver is not happening.  So I visit and buy occasionally from the local producers etc.. and that under a assumption that if a Venezuela event occurred which has more to do with policy than economics that the silver would be valued.

You offer me a shiny gold coin for a bottle of water in the desert I'll laugh at you.. But yes I actually do stack silver in moderation almost as a prepper luxury

People were saying autos were going to get cheap last year.. they were but people were looking for more than a market would give.. I bought two new in 2017.  I'll tell you in ten years that was wise paid no interest on either and got great deals

In reply to by MonsterSchmuck

rosiescenario Wed, 04/25/2018 - 12:07 Permalink

Inflation has been here ever since the $ was not backed by metal. It is always going on, sometimes it gets high other times it is low, but it never stops. Look at what $! would buy in 1950 vs today.

 

 

Deep Snorkeler Wed, 04/25/2018 - 12:09 Permalink

The billionaire caste and the Banker Elite Wolf Clan

extract the last pennies from the middle class.

Pensions, privileges and rights are disappearing.

Inflation consumes the rest.

Enjoy your Trumpian tax cut, suckers.

Philo Beddoe Wed, 04/25/2018 - 12:09 Permalink

We went to In and Out a few times over the last few months and noticed that the people that worked  there look normal if you know what I mean. Not sure if that is an accident.