Modern Day Misery: High Inflation and Declining Real Wages

 

The cable TV networks, even Fox News, almost reluctantly reported on the June inflation numbers.  The pre-announcement predictions (8.8%) were bad enough, but 9.1%?  And wholesale prices above 11%?  These figures indicate a shrinking retail margin, never a good sign and an anomaly: how can inflation, purportedly caused by short supply issues and high demand, be coupled with a shrinking retail margin, an indicator of discounts employed to spur demand?  And what of unemployment?  It is at near “full” employment levels, stuck at 3.6%.  Overall employment numbers show a reduction in overall employment (jobs) in the month with a corresponding increase in the number of those who chose not to participate in the workforce (excluding the unemployed seeking jobs).

These figures are indicators of an economy in trouble, of a recession. Despite what would appear to be near full employment, with a “we’re hiring” sign on the door of virtually every business in America, real wages are down.  This defies conventional economic understanding.  There is an obvious need for workers and an increasing number of people are choosing to remain on the sidelines, yet, real wages are down 3.6%.  When combined with record inflation (and with prices pushing historical levels) this creates a kind of double secret inflation; these rates together comprise a modern-day measure of stagflation, a misery index of, wait for it, 12.46%.

There is, however, something else going on here — something discordant and unexplained.  How can wages be depressed in a low unemployment economy with declining labor participation?  These trends would indicate an increased demand for labor and any reasonable economist would expect a commensurate rise in real wages.

Nope.

Can immigration explain this anomaly?  Legal immigration figures are presumably integrated into the Employment Situation survey figures, but what of illegal immigrants?  This might well be a massive blind spot in the monthly Labor Department Employment Situation survey.

The number of illegal persons who are expected to enter the US at our southern border in fiscal 2022 is estimated to exceed 3 million.  Fiscal Year 2021 illegal immigration has been estimated at just shy of 2 million.  Both of these figures may understate the actual figures.  In addition, more than 80% of these illegal entrants are presumed to be working-age adults, most of them single.  Their options for economic help in the US are limited (welfare), and to survive, they must work. And they do work.  They are lucky.  Successful, illegal immigrants who arrived before them have found ways to survive and even thrive.  They’ve found ways to skirt work-status checks, to enter and participate in US commerce, to pay taxes, even to build businesses and buy property even if they cannot obtain a conventional mortgage or business loan.

Illegal workers are largely hidden from the Employment Survey.  The result, amid what appears to be a declining employment participation rate and low unemployment, is that 2% of the workforce (or more if considered cumulatively) is illegal and not considered in the numbers.  Unemployment figures are understated, likely by at least 2% or more, making the “real” US unemployment rate something more in the vicinity of 5.6% or higher.

That’s how there can be low reported unemployment rates and declining real wages.  There is actually a glut of people seeking employment; they are just hidden in the shadows of illegal immigration.

This is not good news.  This Biden recession, which is not yet acknowledged but is certainly here to stay, will eventually result in the shedding of jobs in corporate America.  Marginal businesses will fail.  Large employers will downsize and shed struggling business units.  The reported employment situation will only get worse.

And so will the modern-day misery index.

Our only consolation is that despite the old bromide, misery does not like company.  Illegal migration, despite open borders, free plane tickets, and new cell phones, will decline just as gas prices will as everyone hunkers down to weather the latest self-inflicted, left-inspired, economic meltdown.  Illegal immigrants will not risk paying the cartels for entry if the US economy slumps and they cannot find work.

In the meantime, we should build the wall.

Published in Immigration
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There are 14 comments.

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  1. MarciN Member
    MarciN
    @MarciN

    I’ve been wondering about this for the past couple of months–that is, the likely impact of the millions of illegal immigrants. It must be a broad impact because, as I understand it, the Biden administration is ferrying by plane the illegal immigrants all over the country. 

    Thank you for writing this out so clearly. 

    • #1
  2. Bryan G. Stephens Thatcher
    Bryan G. Stephens
    @BryanGStephens

    What I am hearing is the employment market is turning. Big companies are already cutting staff and many are not hiring thinking the 3rd and 4th quarters are going to be full blow contractions. 

    Also, unemployment is a lie.  Lots of people are past 18 months and don’t show up.

    • #2
  3. Dr. Bastiat Member
    Dr. Bastiat
    @drbastiat

    Great post. 

    • #3
  4. Front Seat Cat Member
    Front Seat Cat
    @FrontSeatCat

    MarciN (View Comment):

    I’ve been wondering about this for the past couple of months–that is, the likely impact of the millions of illegal immigrants. It must be a broad impact because, as I understand it, the Biden administration is ferrying by plane the illegal immigrants all over the country.

    Thank you for writing this out so clearly.

    Aren’t you in Mass Marcy? How are things there – do you see a lot of influx of illegals?  Maine can’t find enough housing for them all.

    • #4
  5. I Walton Member
    I Walton
    @IWalton

    Illegals will continue to come.  There is plenty of work and drugs still sell well.   While we can say that at some point illegal entry won’t be worth the trouble, the US will be over by then.   Can we fix this through elections?  They were stolen when we held the White House and they were new at it.  If they can and do steal the next elections, well run states have to step up, close their own foreign borders if they have any,  arrest and export illegals. and not let them work.   When Washington interferes, they’ll have to declare independence.  Will Washington use  the military?  The remaining professional military will have to make decisions as well and those who make the right one have to be hired by the states.  It’s insane, of course, but do we really think the United States will survive if they steal the elections?  Top down can’t work even if the Chinese weren’t in charge which they will be once the current batch of total idiots is gone. I imagine they can’t believe that we’re doing it with just nudges and a few bribes, and of course Biden whom they control.  The Chinese are the best at top down but will rot as well, so we can survive but not by waiting for things to work out.  If we don’t take the House and/or Senate with folks capable of putting the brakes on these people, it’s over. 

    • #5
  6. MarciN Member
    MarciN
    @MarciN

    Front Seat Cat (View Comment):

    MarciN (View Comment):

    I’ve been wondering about this for the past couple of months–that is, the likely impact of the millions of illegal immigrants. It must be a broad impact because, as I understand it, the Biden administration is ferrying by plane the illegal immigrants all over the country.

    Thank you for writing this out so clearly.

    Aren’t you in Mass Marci? How are things there – do you see a lot of influx of illegals? Maine can’t find enough housing for them all.

    There’s nothing said about it, but I’m seeing some strange things like dormitory-style housing going up in Hyannis. We’ve needed affordable housing for decades, so perhaps that’s what it is. But I can’t help wondering. 

    • #6
  7. Dr. Bastiat Member
    Dr. Bastiat
    @drbastiat

    I Walton (View Comment):
    Can we fix this through elections?  They were stolen when we held the White House and they were new at it.

    It’s true that we we held the White House.

    It’s not true that they were new at it.  I think Richard Nixon would agree with me.

    • #7
  8. DaveSchmidt Coolidge
    DaveSchmidt
    @DaveSchmidt

    Lots of people are stepping out of the workforce. Some are resisting the trend.

    I am starting to get the stinkeye for not retiring.  The management would love to replace me with someone cheaper, though the current pool of qualified applicants would be very small.  There is also the fact that I am one of the more productive workers. 

    I plan to hang on for several more years. My employment history was pretty sketchy until the last 25 years.  My chronological age and employment age do not line up.  So I work like I am one of the young and ambitious. 

    • #8
  9. Susan Quinn Contributor
    Susan Quinn
    @SusanQuinn

    Doug, isn’t there some decline in the numbers where we declare we are in a recession? Or is that just an informal measure? Or when Biden ever decides to acknowledge it. Something about two declining quarters . . . 

    • #9
  10. Phil Turmel Coolidge
    Phil Turmel
    @PhilTurmel

    Dr. Bastiat (View Comment):

    I Walton (View Comment):
    Can we fix this through elections? They were stolen when we held the White House and they were new at it.

    It’s true that we we held the White House.

    It’s not true that they were new at it. I think Richard Nixon would agree with me.

    The documentary 2000 Mules mentions that True the Vote purchased historical data for some of the perps unique cellphones from the 2020 harvesting results and found similar activity in 2016 and 2018.  The “steal” has been growing and growing.

    • #10
  11. Doug Kimball Thatcher
    Doug Kimball
    @DougKimball

    Susan Quinn (View Comment):

    Doug, isn’t there some decline in the numbers where we declare we are in a recession? Or is that just an informal measure? Or when Biden ever decides to acknowledge it. Something about two declining quarters . . .

    Officially, after two quarters of reported declining GDP, we are experiencing recession.  We always find out ex-post-facto.

    • #11
  12. Zafar Member
    Zafar
    @Zafar

    If there’s a glut of workers why so many ‘we’re hiring’ signs?

    • #12
  13. Susan Quinn Contributor
    Susan Quinn
    @SusanQuinn

    Zafar (View Comment):

    If there’s a glut of workers why so many ‘we’re hiring’ signs?

    Because eligible workers don’t want to work.

    • #13
  14. Doug Kimball Thatcher
    Doug Kimball
    @DougKimball

    Zafar (View Comment):

    If there’s a glut of workers why so many ‘we’re hiring’ signs?

    Most of those signs are for entry level or low skill jobs – retail, construction, fast food – and if those employers are national companies, employees must be legal; HR departments insist on it, even require e.verify.  There is a shortage of legal, low-skill, entry level employees who will work for short pay.  This was once the realm of part-time teenagers, but no more.  Teenagers are not pressed to work anymore, much less take jobs as dishwashers, landscapers, fast food workers or retail clerks.  Work is no longer a worthwhile experience.

    • #14
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