As the left chart below shows, this has been a very strange recession – they don’t normally hand power to workers. That seems to be what has happened this year though, with signs of a tight labour market and employers having to complete for workers: the National Federation of Independent Business’s “Jobs Hard to Fill” index is running at record highs.
With other inflationary pressures mounting, wage pressure could fan the flames and lead to higher inflation than we have been used to for some time. Looking at the right chart, consumers certainly seem to be pricing in that possibility.
4. Shipping costs remain 3x higher than at start of 2020 – a “transitory” effect?
Many have pointed to the inflation we have seen so far as being “transitory”. There are plenty of reasons to believe this, but it is spooky to consider if this is really the case.
On top of a loss of companies and therefore competition to the recession, shipping costs remain persistently high, placing further supply-side inflationary pressure on the economy. With shipping costs still triple what they were a couple of years ago, is inflation really as transitory as many believe?
5. Natural Gas prices have skyrocketed
Continuing on the theme of inflation… remember when the British gas logo used to be a small, blue ghost? These natural gas prices should send ghostly shudders through the bones of anyone who needs to fill a gas tank this quarter, like me!
Prices have risen 292% year to date, 94 times the rate of UK inflation and far ahead of UK wage growth at 7.1%. A tank of gas used to cost me £580 with futures prices around $50… with prices now closer to $230, I think I’ll be lighting the log burner this winter and cooking by open fire or microwave!
6. Safe haven JPY usually strengthens in a risk off environment – what happened?
With these macro risks on the horizon, can investors rely on the traditional safe havens to protect themselves?
