At this point, it’s tempting to ignore the never-ending reports of job cuts across the world’s largest economy.

After all, they’ve yet to manifest in nationwide employment aggregates, which continue to suggest the US labor market is woefully short on workers, not jobs. Jobs are generally plentiful, which presumably goes a long way towards explaining why job cuts haven’t led to higher jobless claims, let alone weakness in monthly nonfarm payrolls.

If you want a job, you can probably find one, even if it’s not the job you want. The preponderance of “unwanted” jobs (if you will) is indicative of what I continue to see as a very challenging math problem both for the Fed and for anyone who suspects that wage growth, negative in real terms though it might be, will remain too “high” to be consistent with a durable decline in inflation.

A sweeping Bloomberg analysis shows that since October, there have been “at least” 473,000 layoffs announced or implemented by some 800 firms globally.

As the simple chart shows, around a third of those cuts are concentrated in tech.

473,000 sounds like a lot. And it is. But on the last business day of January, there were almost 11 million job vacancies in the US alone.

Plainly, the Fed can’t “fix” that problem by engineering 11 million layoffs. Elizabeth Warren would be ready to hold military tribunals for the Fed board. So, the fallback plan for ameliorating the situation entails curbing demand such that a meaningful percentage of open positions are rendered superfluous. But so far anyway, that effort has been an abject (i.e, complete and total) failure.

Consumption in the US is robust. At the beginning of 2023, both nominal and real spending ran at the briskest pace since the government was sending everybody free money. Not surprisingly in that context, services sector inflation is unbowed.

So, when I read that McKinsey is cutting 1,400 jobs in a “rare” round of layoffs, or that Disney is doing away with its metaverse division which, in a worst-case scenario, might mean laying off 500 people, it’s hard to see how these decisions are going to make any difference whatsoever where it “counts.” (I should note that Disney is actually planning to lay off a total of 7,000 people.)

Consider also that in many cases, recently announced job cuts aren’t even large enough to offset the number of people hired over the past 12 months. Take Accenture, for instance. The firm is laying off 19,000 people. But it hired 39,000 over the last year.

It seems reasonable to suggest there’s an endemic mismatch between the jobs that need filling and the types of workers currently being laid off. Depending on your role, a newly-jobless Meta worker isn’t going to go serve sandwiches, not just because she’s arrogant, but because by virtue of having made so much money working for Meta, she probably doesn’t need to, particularly when you account for any severance package. And you can say the same thing for a lot of tech sector workers.

At the same time, Americans, in their infinite wisdom, have decided to slam the door shut on Central and South American immigrants. That’s economic suicide. Anybody who tells you otherwise hasn’t worked in any commercial kitchens during their life, and apparently hasn’t noticed the preponderance of Hispanic workers in all manner of critical industries, where they’ll happily toil for what, to the fortunate among us, seems like a pittance.

America’s homeowners and 401(k) millionaires decided to retire early during the pandemic, which made a lot of sense for a lot of reasons, but now a lot of them don’t understand why the bill for a poolside BLT and Bloody Mary is $47. Their permanent vacation is part and parcel of the labor shortage, their swollen retirement account is part and parcel of overheated demand and the fact that Julie is folding the resort towels instead of Juanita is part and parcel of the xenophobia which, if we’re not careful, is going to mean elevated services sector inflation in perpetuity.

I don’t think this is solvable. I really don’t. I think the pandemic was a tipping point. It’s very difficult for me to imagine a scenario where the services-based US economy is able to return to the kind of semi-serfdom that existed prior to COVID. Workers simply aren’t going to accept it.

A quarter of a million job cuts (or whatever it is) in tech simply don’t matter from a macro perspective, or at least not in the context of this macro discussion. Either demand collapses entirely such that services sector businesses are able to meet their labor needs without paying up, or wage growth will remain very high for the foreseeable future which, if you assume enough in the way of stabilization on the goods side to flip wage growth positive for most services sector workers, will mean sticky inflation. That is: If your wages are growing 6%, and thanks to a sharp moderation in goods inflation, overall price growth is “just” 4.5%, you’re making more money, both in nominal and real terms. That means you’ll be more inclined to spend, all else equal.

Although companies may experience negative operating leverage in the near-term, as long as wages are high, they’ll retain some pricing power. And they’ll avail themselves of that at every opportunity in order to offset the very same high wages, so that the bottom line doesn’t suffer too much.

You can take what you will from all of the above, but my contention is that absent a serious shock (e.g., a lasting and severe crisis in the banking system), immigration reform or an immediate cessation of geopolitical hostilities, inflation isn’t going back to 2% sustainably. The question in the US context is how long it takes the Fed to admit as much.