An economy is more than the sum of its parts

By Morf Morford

Tacoma Daily Index

If there is anything we should have learned about our economy in the past two years or so, it is that our economy, any economy is more, much more, than the sum of its parts – and our economy has many parts – many moving parts.

And as we are learning, the failure of any single one of those parts, ripples through every other part – even those far away or seemingly unrelated.

The financial talking heads, who told us just a few weeks ago that price increases (also known as inflation) would be temporary, are now telling us that price increases (AKA inflation) look to be close to permanent.

Those quivering, even collapsing, links in our supply chains – and the labor, goods and services they provide for each one of us – as much as we may not recognize them, are in fact highly essential – and as much as we’d prefer to ignore or deny the reality – these links are in fact, highly vulnerable – even fragile.

Like a family, a neighborhood, a city or even a nation, an economy is a multi-faceted system with inter-locking and inter-related pieces, any one of which, with its own set of variables, challenges, vulnerabilities and intentions impacts the others in, most of the time, unpredictable and unforeseeable ways.

The Great Resignation

Who among us, for example would have imagined that, as our economy and related markets around the world slowly regain any lost ground and move ever so tentatively toward anything resembling a “new” normal that we would see what the experts are calling “the great resignation” where the highest number of workers in decades leave their jobs?

With pay increases, added benefits and even, in many case, sign-up bonuses, who would have imagined that record numbers of workers – in every field from education to airlines to medical staff and much more – would be resigning, quitting or taking early retirements?

The Labor Department reported that quits jumped to 4.3 million in August – the highest on records dating back to December 2000, and up from 4 million in July.

That’s about 3% of the entire nation’s workforce.

Hiring also slowed in August, the report showed, and the number of jobs available fell to 10.4 million, from a record high of 11.1 million the previous month.

In other words, hiring slowed sharply in August and September, even as the number of posted jobs was near record levels.

In the past year, open jobs have increased 62%. Yet overall hiring has actually declined slightly during that time.

How can there be more job openings and less hiring?

Welcome to the puzzle of the 2020-21 economy.

As COVID-19 cases surged in August, so did resignations as “quits” soared in restaurants and hotels from the previous month and dramatically rose in other public-facing jobs, such as retail, hospitality and education.

Nearly 900,000 people left jobs at restaurants, bars, and hotels just in August, up 21% from July. Quits by retail workers rose 6%.

And some areas, like childcare, are far worse. And without childcare, how many parents, especially mothers, are available for full-time – or even reliable part-time work schedules?

In short we have a situation, where as one economist put it we have a scenario with not enough people. Not enough equipment and/or parts. Meantime, customers are waiting for their orders, or waiting to place their orders.

And if you’ve ever worked directly with customers, you know that, in most cases, a customer left waiting is a customer lost forever.

And, most of us also know that a disgruntled customer is a powerful force in an economy.

And not a positive one.

Under normal conditions, when workers quit, it is typically seen as a good sign for the job market; people usually leave jobs when they already have other positions lined up or are confident they can find a new one.

By any definition, we are far from normal in the closing months of 2021.

The increase in quits was heavily concentrated in sectors that involve close contact with the public, this could be a sign that fear of COVID also played a large role.

It’s not just us of course.

All the world’s a stage

We in the greater Tacoma area, with our hands in the global economy, feel the impacts of the military withdrawal from Afghanistan and the many repercussions of Brexit, and of course COVID, amplified and ricocheting though our own labor markets, real estate prices and grocery costs.

And each participant in this chain responds in its own way and sends it own ripples, with unforeseeable outcomes out into the ever-shifting matrix of a dynamic economy.

A pay raise here, a production cut-back here, a union demand or capitulation over there will have its own impact – and a reaction favorable to one party may have intensely negative impacts to another group.

And a labor or management or production decision or policy will set a precedent, a warning or an inspiration for policies and decisions for years, if not decades to come.

In our global, digitally connected economy, the party never stops and every piece, recognized as “essential” or not, has its impact.

Social Security recipients will see the largest inflation-related increase in benefits in many years (over 5%).

The increase will help those individuals cope with increasing inflation – but will that same increase in benefits also increase inflation even more?

Will a “cure” become a “cause”? Or will a “cause” become a “cure”?

Stay tuned for the next episode of the great economy – you can expect plot twists, character reveals, cliff-hangars and surprise endings.