I’m Sick of the Debate Over Jobs vs. Inflation
A weak jobs report erased some worry about inflation last week, and the market rallied.
Variations on that headline are constantly clogging news feeds lately, and I’m getting sick of it.
Did stimulus checks hold back folks from looking for work? Are women leaving the workforce because it was just too hard to homeschool kids and do well at work? The answer is probably yes and yes.
Are employers not compensating employees well enough to take lower-paying jobs? So there is no wage inflation? Probably so.
Is there a wall of savings that higher-income folks are using to buy a second home or new cars? Yep.
If your husband earns enough to support the family, should you give up your career and focus on raising children? Only if you know with 100% certainty that this is the man you will be with for the rest of your life. And although marriage and divorce rates both fell during the pandemic (partly for economic reasons), about half of marriages still end in divorce at some point so that’s not a sure thing either.
Frankly, many friends and other women I speak with later regret having given up their careers for their kids. They wish they had not seen it as a binary decision, and they realize it would have been doable to juggle both and excel at both. Many women yearn for the personal and professional fulfillment of a career, especially after their children become teenagers or leave for college and they recognize a huge void in their lives.
But back to jobs and inflation… When the jobs number was weak on Friday, 10-year treasury notes prices rose and yields went down because if more people aren’t working then there is little worry about inflation.
Despite that, we all know inflation is everywhere. Lumber, the price of food, housing and cars? All going up. In fact, I had an argument with my hairdresser over inflation. (Don't worry, my hair came out great for my new photos on my website.) She was arguing that it’s all Biden’s fault because he’s wrecking the economy.
“No, you are wrong,” I told her. “Prices are going up because the economy is recovering and there are supply disruptions with our global supply chain. Low-interest rates cause a rush to buy houses and tackle DIY projects at home.”
But more importantly for those who don’t understand the economy, inflation could become a serious political issue because inflation impacts lower-income folks much more than higher-income folks.
So the point of all of this is that, as a metals and mining (commodities) expert, the old adage applies: the cure for high prices is high prices.
Tech stocks got too expensive, so buyers went away after everyone ignored traditional valuation metrics. Same thing applies to commodities, but with commodities, it is all about supply and demand and that makes them uniquely different. If branded food prices are too expensive, we can trade down to private label food. If lumber prices are too high and therefore the cost to build a new house is too expensive, then maybe we trade down and buy an existing house or wait a while and save money for when prices go down.
Everything is cyclical, so be patient.
You can navigate these cycles with confidence if you understand your goals and needs, have a solid financial plan, and have a clear vision to invest for the long term - that’s how we work with clients at Wealth Engagement.