Drizzle, Drudgery And Drugs

I’d say nobody cared about the June vintage of the Dallas Fed survey but…

Actually, there’s no “but.” Nobody cared. It’s a Monday in June.

“Summer Mondays have their own defined character in the Treasury market and, if anything, they make the best case for the four-day work week – with an early close,” BMO’s Ian Lyngen and Ben Jeffery quipped.

For what it’s worth, Monday’s lone data release was a miss, at least on the headline. Dallas Fed printed 31.1, down from 34.9 and shy of consensus (32.5.)

So, why mention it if nobody cared? Well, if I’m being honest, I mention it mostly because it’s drizzling here on the island I call home. And it’s not the kind of drizzle that clears the air. It’s an oppressive drizzle which, if anything, made an already sticky day even less bearable. Even paradise occasionally disappoints.

But a figurative and literal dampening of the spirits (a sapping of my creative energy and general joie de vivre) wouldn’t have been sufficient to compel a pointless article. My respect for readers’ time takes precedence over boredom and itchy keyboard fingers. Rather, I mention the Dallas Fed because, consistent with every other survey, the prices gauges are going berserk. The raw materials prices index hit a record in June, as did the index for finished goods prices (figure below).

Oh, and the index for wages and benefits set a new record too, rising nine points from May. As you can see, these gauges have risen more or less inexorably over the past several months.

More telling still were this month’s special questions. Almost 400 Texas business executives responded to supplemental inquiries about supply-chain disruptions and difficulties in hiring or recalling workers.

As the figure (below) shows, supply chain disruptions are pervasive across industries and have worsened materially since February.

Asked if their business was currently trying to hire or recall workers, 53%, 57% and 69.3% said yes in retail, services and manufacturing, respectively.

The responses to a question about “impediments” to hiring or recalling workers were telling. 77% of manufacturers cited a lack of available applicants. 60% cited generous unemployment benefits. 33% said would-be workers want too much money. The comparable figures for the services sector were 67%, 44% and 40%. Those numbers are up significantly (although not dramatically) from April.

Notably, there’s been an uptick in applicants in services and retail who can’t pass a drug test and/or a background check, according to Texas businesses. The figure (below) is derived from the same June Dallas Fed survey.

The numbers for manufacturing were actually lower for June versus April.

I wouldn’t want to draw spurious conclusions from one survey, but there’s a very real connection between the displacement created by the pandemic and drug usage in the US.

Almost 91,000 people died of an overdose in America through November of last year, a record. “As the virus transfixed the nation, the drug crisis spread to largely untouched parts of the country, exacerbated by the recession and millions of job losses,” Bloomberg wrote earlier this month, noting that as “counseling services were forced online, inpatient clinics closed and mobile clinics pulled back… many Americans relapsed and some turned to drugs for the first time.”

Perhaps that’s part of the problem when it comes to labor supply in America.

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2 thoughts on “Drizzle, Drudgery And Drugs

  1. Are the manufacturers complaining about a shortage of applicants or a shortage of skilled applicants capable of doing the work ? If we have a broad-based shortage of skilled workers we need an expanded training system to up the supply.

  2. Maybe there’s more to modern American infrastructure than roads and bridges if we can’t field a sober workforce with the right skills and offer a living wage for their services. There’s a lot more impeding a robust economy and GDP growth in this country than the lingering effects from a pandemic. Covid, in a weird way, has given us a reprieve from looking clearly into the mirror.

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