Updated: Nov 17, 2021
Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Last Wednesday, the Bureau of Labor Statistics (BLS) reported that their Consumer Price Index was 6.2% higher in October than a year ago, the biggest annual increase since December 1990. Even core inflation—which takes out food and energy prices—rose 4.6% over the past year, its fastest growth since August 1991. This data was worse than expected, and a deeper look at the numbers reveals some downright frightening details. For example, fuel oil prices surged 12.3% just last month, and are 59.1% higher than last year. Natural gas prices rose 28.1% from October 2020, while used vehicle prices were 26.4% more than a year ago. As I’ve mentioned before—and despite any other reports to the contrary—prices are rising faster than wages. Don’t believe me?
That means real wages fell 0.5% last month, and1.3% over the past year.
To add insult to injury, we found out last Tuesday that for the second month in a row, producer prices rose at a record pace of 8.6% over the past year. Seems like those supply-chain issues are sticking around longer than unwanted guests. What is the Fed doing about this? I’ll tell you what they’re not doing, and that’s raising rates. The Fed recently announced they were reducing their asset purchases each month but making no changes to rates. At this pace, we won’t see any rate changes until summer 2022. Both Fed Chairman Powell and Treasury Secretary Yellen promised that this inflation would be temporary, and many were foolish enough to believe them. We now have the worst rate of inflation in 30 years, and real wages continue to fall. How can this be temporary when the money supply is 38% higher than before COVID, and business leaders are warning that supply-chain issues will be around a lot longer than policymakers predict?
Get Back to Where You Once Belonged
According to Partnership for New York City’s latest survey, just 28% of Manhattan office workers are back in their offices. This is quite a disappointment, considering that their June survey found that 62% of workers were expected to return by the end of September. What happened? 48% of respondents said that COVID-19 was a primary factor in the slow return, followed by employee preference for remote work (33%), and childcare issues (14%). Real estate has the highest daily attendance (77%), followed by financial services (27%), and law firms (27%). Way to go, real estate! The future doesn’t look much better, with just 49% of workers expected back by the end of January 2022. Another scary finding was that 34% of the companies surveyed expect a reduction in their NYC office space in the next five years. If Jojo, Sweet Loretta Martin, and Paul McCartney could all get back, it shouldn’t be taking Manhattan office workers so long to do the same. So, get back to where you once belonged, New York City’s economy is counting on you.