– This is the script of CNBC's financial news report for China's CCTV on Sept. 19, 2022.
Although last week's railroad workers' strike did not happen, the number of strikes and the number of participants that took place within the U.S. in the first half of the year have shown a significant increase.
According to Cornell University, there were 180 strikes involving around 78,000 workers in the United States in the first half of the year, up from 102 strikes involving 26,500 workers in the same period last year.
One of the main reasons for the frequency of strikes is the increased pressure on the cost of living due to the current high inflation in the US. Workers are demanding wage increases from companies by going on strike. This chart shows that although the average hourly wage has been rising in the private sector of the U.S. economy, it still didn't outperform inflation.
Tyler Goodspeed
Cato Institute adjunct scholar
"Indeed, for two of the past three months, we've actually had the aggregate wage bill in the economy, not keep pace with inflation. And so I think that there's going to be a lot more pressure coming from labor for wage hikes just to get even with the inflationary pressure that we've seen over the past year and a half."
And with the railroads reaching a tentative agreement with unions to give workers a 24 % pay increase over the five years from 2020 to 2024. A lawyer who has studied U.S. labor contracts then said that many unions in other industries are now using the agreements reached by railroad unions as a measure of bargaining success. That means more wage increases will be possible, and that may also heat up inflation further.
In addition to workers demanding wage increases in the context of high inflation. The current tight labor market in the U.S. is also leading companies to raise salaries to recruit talent when they are hiring.
This chart shows the number of job openings and the number of unemployed job seekers in the U.S. as of July this year. The ratio of these two is almost the highest since records began in the 2nd millennium. This is a reflection of the oversupply of labor in the United States.
The background of high inflation, combined with the current shortage of workers, has led the market to fear that this could lead to the "wage-price" spiral that occurred in the 1970s. Specifically, in the context of high inflation, the cost of living has increased and workers are demanding wage increases, but with higher wages, people's consumption will increase and companies will pass on the costs, thus further raising prices and reinforcing inflation. A vicious circle is thus formed. And hyperinflation will lead to the overall weakening of the economy.
Greg Branch
Founder of Veritas Financial
"Because wage growth isn't keeping pace with inflation. And so instead of a segment of us having less spending power, all of us effectively have less spending power, and that can have the same recessionary impact that high unemployment."
In the Fed's fight against inflation, Powell has repeatedly mentioned that he would like to see the growth in labor market to slow down in order to lift the pressure on inflation.
So what will the Fed rate decision be like on this week's FOMC? And will it succeed in influencing the U.S. labor market? Let's wait and see.