What the heck did you expect?
That's how I feel about what has happen to labor in this country since the government decided to restrict immigration down to the bone while cutting taxes to corporations at the same time when have a 30 year low birthrate.
We know Jay Powell speaks tomorrow and we know he is caught between a rock and a hard place.
There simply aren't enough workers to go around and wages are going higher. Typical example: Brinker (EAT) , the owner of Chili's and Maggiano's big national chains that can give you a real good look at the economy. Today Brinker reported earnings that sent the stock in a tailspin in part because of the difficulty in hiring people. Listen to what they have to say: "Restaurant labor as a percent of company sales increased compared to the second quarter of fiscal 2018 due to higher wage rates, incentive bonuses and employee health insurance."
To me, this disappointing set of earnings and revenues from a national chain really has everything that must worry Powell. First, Brinker, with a stock that has the biggest drop since the Great Recession, actually put up some terrific revenue numbers. At the same time, though, because of labor costs, the company could not make as much money from their sales boost even as they raised menu pricing which gave them better than expected same store sales.
That's all bad for Powell: rising labor and rent costs contributing to tabs for customers. That's inflation all over the place, the bane of Powell's existence.
But as a co-owner of two restaurants I can tell you how artificial all of these pressures can be. We have had to absorb radically higher minimum wages at the same time we have not been able to find people who will take entry jobs, something that was not a problem even five years ago when we opened Bar San Miguel, our small plate restaurant in Brooklyn.
That's pretty much mandated minimum wage. Brinker faces a worse problem: the U.S. gave a big corporate tax break to big companies of which some was meant to go to workers for better benefits.
So they are getting them in the form, in this case, of health care.
What is Powell supposed to do? Is he supposed to slow the economy to make it so it is easier for the Brinkers of the world can find more workers at lower prices? Is he supposed to raise rates so people can't afford to eat at Chili's so the menu prices go down? Is he supposed to change immigration somehow by talking with President Donald Wall Trump? Good luck with that.
We have these kinds of earnings reports all over the map and they won't change because they aren't supposed to change. The working person after years of no wage increases to speak of and a raw health care deal is finally getting a break.
What's the matter with that?
Can't Powell accept a little inflation? There are so many other aspects of the economy that are pushing prices down: Amazon (AMZN) versus Walmart (WMT) for instance where 100 million shoppers chose the low prices. Amazon is working on eliminating checkers - there are 2 million people at risk. Uber Freight is working to solve the truck driver shortage by introducing Uber to that industry. They expect that it could lower prices by as much as 20% by the end of the year. Believe me, Brinker, if you give it time, will get costs more in line.
But you can see the pressure that confronts Powell. I am urging him to wait as there will be adjustments and innovations that keep labor costs down. I just want him to know that giving the worker a bigger piece of the pie was expected given the president's platform and the local governments' desire to pay employees more. It has been mandated, let it play out and don't raise to prevent it. Why can't the workers at last make a little more money to help them make ends meet?