Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / The Demographic Drag On Stagflation
Transcript
- Lucas: Look at the headline from CNBC on October fifth about the twenty-two-nineteen tipping point for Western population shrinkage. It sounds like distant history, but it is actually the single most potent driver of modern stagflation. We have spent years treating labor shortages as cyclical glitches or post-pandemic hangovers. Luna: Right, because everyone assumed the workforce would just bounce back once the cultural shifts settled. But demographics do not negotiate with business cycles. Lucas: Exactly. And when you look at today’s data, specifically the September nonfarm payrolls adding only twenty-nine thousand jobs while the unemployment rate ticked up to four-point-two percent, you see the mechanism locking in place. The economy is running out of bodies to fill roles, which means every remaining worker has more leverage. Luna: So wages go up, but output doesn’t keep pace? That is the classic definition of cost-push inflation meeting stagnant demand. Lucas: Precisely. And here is the concrete detail that matters: average hourly earnings in the private sector rose to thirty-seven dollars and eighty cents in September. That is an uptick from thirty-seven dollars and seventy-six cents in August, but the real story is the rate of increase relative to productivity. When wages rise faster than what each worker produces, businesses have to raise prices. Luna: And they pass those costs straight to consumers, which keeps the core consumer price index stubbornly high despite any hope for a soft landing. Lucas: That is right. Core CPI was recorded at three hundred thirty-seven point eight in early August, holding firm above three percent year-over-year. This isn’t about energy spikes or supply chain bottlenecks anymore, which we covered in previous episodes. This is about the basic arithmetic of scarcity. Fewer people working means higher marginal cost for every service provided. Luna: It makes me think about the job openings data from JOLTS. Seven thousand seventy-nine thousand openings down from seven thousand three hundred thirty-five thousand last month. That gap is closing, but slowly.