National Retail Federation's Jack Kleinhenz Details How Labor Market Will Play Increasing Role in Economic Recovery; Notes Rising Wages Could Lead to Inflation
WASHINGTON, DC - The National Retail Federation (NRF) recently published the September issue of its Monthly Economic Review, outlining the strong consumer spending seen over the past year and how, due to the tapering off of government stimulus programs, the labor market will now need to generate ongoing strength in wages. In the report, NRF predicts that the higher wages employers have had to pay as they struggle to fill job openings could lead to more inflation in the coming months.
“Consumer spending is currently far above pre-pandemic levels thanks to unprecedented monetary and fiscal policies that have backstopped demand by putting money into wallets,” Chief Economist Jack Kleinhenz said, discussing how monthly child tax credit checks bring extra income to some consumers. “But as the economy moves forward into the later months of 2021, federal aid will be tapering off, and there will be an important focus on the ability of the labor market to generate ongoing strength in wages and salaries to support spending. U.S. consumers remain in the mood to spend but the labor market and job creation will play an increasing role in their ability to do so.”
Even though the number of Americans out of work remains well above pre-pandemic levels, the number of initial jobless claims is returning to normal, a press release from NRF stated. Claims totaled 353,000 as of the week ending August 21, according to Labor Department data cited in the report. That was near the pandemic low seen the week before, and the four-week moving average for jobless claims was at its lowest point since mid-March 2020, just before the economy began to shut down because of the pandemic. Payrolls gained 943,000 jobs in July, the largest increase in 11 months, with gains in 38 states and stable employment in the remaining 12.
As of June, there were 10.07 million nonfarm job openings but only 9.48 million people seeking work, which is just under one unemployed worker for each job opening in the economy, the press release continued. For the 12 months ending in June, there were more job openings than people looking for work, so wages and salaries rose 3.2 percent year-over-year. The Employment Cost Index, which includes wages, benefits, and other factors to measure total compensation costs while factoring out shifts between industries or occupations, grew 2.9 percent, its largest increase since the end of 2018, the release stated.
“The bulk of the recent upturn in U.S. inflation has been driven primarily by supply chain bottlenecks and low levels of inventories, but high labor costs are often passed on to consumers and are considered a precursor of broader inflation,” Kleinhenz said. “We will be monitoring labor market developments intently to determine if expanded payrolls expected in the coming months will influence inflationary pressure, especially as wages and salaries increase.”
Finally, the release discussed how the spreading Delta variant could cause “relatively modest” disruption to retail sales but not likely enough for NRF to revise its forecast that 2021 sales should grow between 10.5 and 13.5 percent over 2020.
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