Last week, US inflation remained high on most measures, and on the trimmed mean measure used by the Fed, when it was arguing that inflation was “transitory”, it rose to its highest level since 1984. At the same time, US payrolls surged by more than half a million, whilst the number of vacancies to unemployed remained at 2:1. Now, the UK data shows a similar picture of surging inflation, strengthening employment and no recession. It defies the speculators and catastrophists alike.
UK headline inflation (CPI) rose to 10.1% from 9.4% in June, and an estimate of 9.8%. CPIH, which includes homeowners housing costs rose to 8.8%, from 8.2%, showing that current inflation most certainly is not just a question of rising energy prices, but is broadly based, which is what you'd expect from inflation caused by a massive previous excess printing of money tokens, as happened during the insane lockdowns. The biggest contributor was rising food prices. On the RPI calculation of inflation, prices rose last month by 12.3% compared to a year earlier. This is all before the further increase in energy prices in the pipeline for October and January, when the price cap is raised, and its before the full effect of food prices rising as Britain suffers from Brexit, and the loss of European workers required to harvest its production.
The narrative of the speculators and their representatives, and echoed by the catastrophists is that this inflation will lead to a recession, because workers will be forced to cut back spending, as their wages fail to keep pace, but the data, as in the US, does not support that conclusion either. It assumes that, as with the last 40 years, wages do not rise at least as much as prices. If that assumption is false, then workers can continue spending on, at least, the same basis, so that there is no reduction in demand, and with rising prices, and so money profits, every reason for firms to continue to produce more, to employ more workers, and so on. Hence the US economy having added 9 million jobs, and still increasing employment by half a million a month, and the UK economy also having created many more jobs, as well as seeing a significant increase in full-time employment as against part-time employment.
That picture is reinforced in the latest CIPD survey. Vacancies in the UK fell slightly in the last quarter, but are at historically high levels, especially given the high level of employment and relatively low level of unemployment. But, also there has been an increase in the number of inactive workers. That seems due to the increased number of long-term sick, which the vague concept of “long COVID” makes inevitable, particularly for older workers seeking to voluntarily exclude themselves from the workforce, as they approach retirement age. A similar thing is seen in the US, with a high level of inactive workers, who will only be attracted back into the workforce at much higher levels of wages.
Again what this illustrates is that the superficial calculation and headlines about real wages falling is highly misleading. Those headlines talk only about the rate at which hourly wages are rising relative to inflation. But, actual wages and incomes are rising much more than the hourly wage data suggests, for a variety of reasons. Firstly, companies are making all sorts of other payments to workers as part of recruitment and retention packages. Nationwide just announced its paying all its workers £1,000 as a one-off to help them cope with rising prices. Signing on bonuses have become common. Companies are trying to make one-off payments to avoid them being permanent, but they will inevitably be incorporated into wages, as inflation stays high. But, to put it in perspective, an additional one-off £1,000 is equal to a 5% pay rise for someone on £20,000, and about 3%, for someone on £35,000, on top of whatever rise in their hourly rate amounts to.
Secondly, as Marx describes in Theories of Surplus Value, as economic activity picks up, the first response of capital, even before employing additional workers, is to employ existing workers for longer. That means part-time workers work more hours, full-time workers work overtime, and so on. So, even before hourly wage rates rise, actual wages can rise significantly, simply as a result of more hours being worked. If you were a part-time worker working, say, 20 hours a week, if you get to work 40 hours, your actual wages double, even if your hourly rate remains the same, if you were a full-time worker, working 40 hours, and now work 50 hours, being paid time and a quarter for the 10 hours overtime, then your wages increase by 31.25%. So, in both cases, even without a rise in hourly rates, actual wages rise much more than inflation at 12-13%. In addition, most people do not live in single person households. If in a two-person household, one person was unemployed, and now gets a job, that might be the equivalent of household income doubling, and household expenditure is a function of total household income. Similarly, if one person was part-time and becomes full-time.
Thirdly, as the US data shows, it has been amongst the lower paid workers that hourly wages have risen most, and these are also the workers most likely to spend any increase. This higher increase seems down to the fact that its amongst those kinds of jobs that demand has risen fastest, but also, with unskilled jobs, workers can easily move from one to another, in search of those paying the highest wages, and its amongst such workers that the highest Quit Rate has indeed been seen. Workers in more qualified jobs, may find less potential for switching jobs.
Finally, the narrative ignores what is apparent, which is that across the globe, including in Britain, unlike the condition for the last 40 years, workers are joining unions and taking industrial action, to demand higher wages. Most of the strikes don't even get reported, because they are very short lived as employers cave in, it tends to be only amongst the public sector, or sectors dependent on the state, that resistance is being mounted by employers, with the state standing behind them to try to prevent wages rising, and so forcing workers to have to engage in longer strikes.
But, for all these reasons wages are rising, and household incomes are rising faster than prices, and that will become more apparent, as the year progresses and strikes win those higher wages for workers. So, the presumed fall in demand from workers desired by speculators, and anticipated by the Bank of England, and by catastrophists, will not materialise. Certainly, there will be some who will see a deterioration in their position, but that will not be the position in aggregate. So, when various social-democrats talk about recession and economic crisis in Britain, it is simply opportunist wishful thinking rather than reality. They seek to play up such talk, because in their crude conceptions they can only see such crisis as the foundation upon which to attack the Tory government, just as for the catastrophists, continual anticipation of crisis is equivalent to the potential for some impending awakening of the working-class and revolution.
There is no economic crisis or recession, as the continued increase in employment demonstrates, both in the US and UK. If one arises, it will be self-inflicted, much as with that being imposed by Chinese authorities under cover of its Zero-COVID policy, just as such a crisis was confected with lockdowns for two years, after 2020. It will be one deliberately created by closing down the economy under cover of energy shortages, and so on, shortages which have themselves been fabricated, as European governments boycott Russian oil and gas supplies, and so on. It will be a deliberately created recession whose sole purpose will be to prevent wages rising further, and to prevent interest rates rising, which would cause the prices of the fictitious capital of the ruling class to crash.
It shows the extent to which that fictitious capital and its ruling class owners are now pernicious even in respect of the real capital upon which the wealth of society itself is currently based. It shows that - The Real Enemy Is At Home, in the shape of the ruling class. It shows the need to consign that ruling class to the dustbin of history, and to engage in a political class struggle for industrial democracy, and control of our collective property.
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