Why salaries will keep going up long after the supply-chain crisis ends, according to Jefferies
- Jefferies analysts said that supply chain pressures are probably "past their peak."
- But wage growth — and inflation — will probably be here to stay for a while, they said.
In 2021, hyper-specific shortages have become common. For example, New Yorkers can't find cream cheese, and gym bros are struggling to craft their favorite Chipotle bowls.
However, analysts at Jeffries have some good news for both shoppers and workers. In a Friday note, analysts said third quarter corporate earnings show that supply chain pressures "are past their peak." Manufacturers finally have a backlog of goods customer orders slightly dropped, according to key indicators. At the same time, they also found that "wage growth is only likely to intensify."
The Conference Board estimates that budgets for raises will be around 3.9% in 2022, setting up workers for their biggest raise since 2008. Meanwhile, as of November, inflation has risen 6.8% year-over-year. All told, that means that even the higher wages employers are offering workers may not be enough to get them back.
Jefferies notes that the "US economy appears to be on pace for structurally higher inflation regardless of supply chain pressure easing." Indeed, the Bureau of Labor Statistics released its latest data on inflation on Friday — and it revealed that the Consumer Price Index has swelled to its highest level since Ronald Reagan's presidency.
However, inflation is expected to ease in the second half of 2022, while it's harder to unspool wage hikes once they're in place. That means that if wages continue to climb, and inflation does cool off, the increased wage budgets and labor costs will pay off in the long run for workers.
Though rising prices could undercut how far worker raises go, slowing inflation next year could possibly ease another persistent shortage: Workers. For months, employers have said they've been struggling to find workers amidst a so-called labor shortage, and they're hiking wages to attract more. So while workers stand to gain, it's unclear how much.