The Wage Price Spiral

The United Auto Workers didn’t get the memo. Jerome Powell wants to stamp out any possibility of a wage price spiral.

The auto industry is in the middle of an escalating strike as the United Auto Workers are fighting for a catch up on the concessions delivered when all of the major US auto makers were on the verge of bankruptcy in the wake of the 2008 Financial Crisis.

But the United Auto workers are demanding a 40% increase in wages over a three year period. The question is, do you think that workers all across North America are looking to the resolution of the strike with the Detroit auto makers? I don’t believe that the workers will get a 40% increase in their contract. I expect they will come closer to 25%. But even that is going to fuel a demand for higher pay across all of manufacturing.

There is no question that wages have not kept pace with inflation. That means reduced purchasing power at the cash register for employees in nearly all sectors of the economy.

What does this all mean?

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Host: Victor Menasce

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