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Inflation positive feedback loop

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User ID: 80962092
United States
05/24/2022 10:49 AM
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Inflation positive feedback loop
I'm starting to see signs and symptoms in my little microcosm of the economy that things are getting really out of hand.

There is so much demand for labor right now that hiring no skill, no experience employees requires such a high rate if pay that training them becomes untenable, from a risk reward perspective. Plus there is a complete absence of candidates that are willing to do messy dirty work even if it pays well. Many companies are pretty much downsizing only staying with their veteran staff right now because the investment required to find viable employees is fruitless. This is driving the cost of labor higher.

This is exacerbated by a present over abundance of work ( as well as a low capacity to handle the work because of staffing shortages). This means companies can literally ask whatever they want, shoot for the moon with margins because there is such a high demand, no sense on even trying to match a price or lower a bid because there is a never ending supply . This drives prices higher.

Our services are often necessary in New construction or renovation, so that drives those prices up to a point where no one wants to take a chance on a project unless it's a guarantee win which means you only have high margin work being done, which brings the costs of everything up ( housing etc ) which gets passed back to the worker who in turn now need to demand more just to make rent.

These are just little observations not even taking into account material price increases on the business end and cost of living increases ( gas groceries) on the employee end

The problem is not every single person and every single industry keeps up the same and eventually one cog fails and destroys the whole machine.

I honestly don't know how long this can keep up but it's scary how you see present pay rates then equate them into actual buying power now vs. say 20 years ago.

Sorry for the long post but wanted to see others observations and predictions on this.