Recession during a labor shortage?

[JPJones]

Was out getting drinks with a friend over the weekend talking amateur economics and it occurred to us that we’ve never experienced or could recall a recession happening during a labor shortage, which is a real possibility right now. I’m interested in hearing all of your takes on what that scenario might be like. I don’t even really know where to start.

[phaster]

[quote=JPJones]Was out getting drinks with a friend over the weekend talking amateur economics and it occurred to us that we’ve never experienced or could recall a recession happening during a labor shortage, which is a real possibility right now. I’m interested in hearing all of your takes on what that scenario might be like. I don’t even really know where to start.[/quote]

simple explanation as I see things,… ever consider the economic idea of stagflation?

in other words consider what we have now w/ covid, not enough goods or services being produced (due to broken supply chains) AND lots of money trying to buy the limited number of items being offered in the market place

said another way we have price inflation for goods and services BUT for the most part, the economy is stagnant for a great majority of people just trying to make a living day to day

[EconProf]

Many reasons, but here are three factors I’ve read about:
1. The overly generous COVID free money meant that for many people getting a job would mean a drop in income, this despite the rapidly rising hourly pay rates offered by desperate employers.
2. California’s generous rent relief programs encourages many to stay unemployed.
3. Mothers with school-aged children quit to take care of their new responsibilities at home, especially in the blue states like CA with strong teachers’ unions. A surprising number are deciding to not return to work.

[sdrealtor]

[quote=EconProf]Many reasons, but here are three factors I’ve read about:
1. The overly generous COVID free money meant that for many people getting a job would mean a drop in income, this despite the rapidly rising hourly pay rates offered by desperate employers.
2. California’s generous rent relief programs encourages many to stay unemployed.
3. Mothers with school-aged children quit to take care of their new responsibilities at home, especially in the blue states like CA with strong teachers’ unions. A surprising number are deciding to not return to work.[/quote]

So how are things in red state St George? Looks like median is up 11% y-o-y per Redfin. Sound about right? Market slowing down yet with rates?

[Coronita]

[quote=EconProf]Many reasons, but here are three factors I’ve read about:
1. The overly generous COVID free money meant that for many people getting a job would mean a drop in income, this despite the rapidly rising hourly pay rates offered by desperate employers.
2. California’s generous rent relief programs encourages many to stay unemployed.
3. Mothers with school-aged children quit to take care of their new responsibilities at home, especially in the blue states like CA with strong teachers’ unions. A surprising number are deciding to not return to work.[/quote]

What… the…fuck…..seriously? This is only a blue state issue????

God if I turn into a senior citizen like this, someone just shoot me and put me out of my misery…I don’t want to become into a grumpy old fart.

[The-Shoveler]

IMO Labor shortage can turn into a Labor surplus very fast once people stop spending.

Right now there is still just lots of money sloshing about.

That said I still stick to my theory that the FED and TPTB are scared to death of a recession for some reason and will issue helicopter money at first sign of serious downturn.

But if we were to get a serious recession I think it would look a lot like 2000 when everything crashed in a heart beat and even good tech people found themselves out on the street.

[Coronita]

[quote=The-Shoveler]IMO Labor shortage can turn into a Labor surplus very fast once people stop spending.

Right now there is still just lots of money sloshing about.

That said I still stick to my theory that the FED and TPTB are scared to death of a recession for some reason and will issue helicopter money at first sign of serious downturn.

But if we were to get a serious recession I think it would look a lot like 2000 when everything crashed in a heart beat and even good tech people found themselves out on the street.[/quote]

I guess it depends on what.
For cars and electronics, there’s a supply chain issue, partly because China factories are closed.

For example, for robotics we need to get these Falcon 500 motors, but they are all backordered.
https://www.vexrobotics.com/217-6515.html

Drivetrain uses 8, and attachments use several more, and need spares, and can’t get them.

Good thing competition season is over.

Manufacturing for other things is also backlogged just because some of these factories are running at reduced capacity due to closures… For example, there’s a 3 months wait for swerve drive systems…

MK4i Swerve Module

For shits and giggles, a dealer in glendale wanted to know if I was interested in purchasing an i4 since they had 2 that are in stock not available elsewhere. They wanted $10k above MSRP….
I balked but again, supply chain issue is pushing car sales prices at unheard of prices.

[EconProf]

Yes, sdr, rates will probably hurt values everywhere.
Glad I bought my three condos last summer. Two of them in same complex (3 Br, 2 Ba, double garage), for $335k each. Zillow puts them at $407k now, for what that’s worth. Another 2,1 condo for $190K, rents for $1100, and Zillow has no updated value for it. Vacancies are non-existent.
This weekend is the Ironman World Championship, which we permanently stole from Hawaii, so lots of visitors, all looking buff too!

[sdrealtor]

Why are those cap rates so low? Wouldve expected much better. That appreciation is also far below here. Family members 2BR condo went from appraising 570K last Summer to inferior condition but same unit next door recently closed for $750K. Vacancies non-existent here also. I thought everyone was leaving here for there. I guess not so much. Rents here also rising the fastest in the country

My prediction will be that rates hit much harder there than here. We have rapidly growing life science and tech industries here that make us less sensitive to interest rate risk than a place like that. Heaven forbid WFH goes away and you may have a full scale melt down. We’ll know for sure in a year or two

This is one major reason CA isnt going anywhere

https://www.princetonreview.com/college-rankings?rankings=top-50-best-value-colleges-public-schools

Enjoy your one weekend of healthy buff people in town. It will remind you of life in SD

[Coronita]

[quote=EconProf]Yes, sdr, rates will probably hurt values everywhere.
Glad I bought my three condos last summer. Two of them in same complex (3 Br, 2 Ba, double garage), for $335k each. Zillow puts them at $407k now, for what that’s worth. Another 2,1 condo for $190K, rents for $1100, and Zillow has no updated value for it. Vacancies are non-existent.
This weekend is the Ironman World Championship, which we permanently stole from Hawaii, so lots of visitors, all looking buff too![/quote]

Why would you buy condos instead of SFH? I thought housing was cheap in utah.

[EconProf]

Good question Coronita, and a simple answer: condos have no yard maintenance for me, are easily rented, appreciate at the same rate as houses, and are less likely to have families with kids.
sdr: not sure where you are getting a 10% appreciation rate here–mine have gone up 21.5% since July, and I’ve heard 20% is the norm. This will probably be a lot less from now on due to rising interest rates.
We are still getting an influx of Californians and the builders cannot keep up with the demand. Utah has an unemployment rate of 2%, so they are coming for the jobs, as well as low taxes, good schools (which largely did not close), clean government, and cheap housing.
But before you remind me–yes, I miss the San Diego weather.

[sdrealtor]

[quote=EconProf]Good question Coronita, and a simple answer: condos have no yard maintenance for me, are easily rented, appreciate at the same rate as houses, and are less likely to have families with kids.
sdr: not sure where you are getting a 10% appreciation rate here–mine have gone up 21.5% since July, and I’ve heard 20% is the norm. This will probably be a lot less from now on due to rising interest rates.
We are still getting an influx of Californians and the builders cannot keep up with the demand. Utah has an unemployment rate of 2%, so they are coming for the jobs, as well as low taxes, good schools (which largely did not close), clean government, and cheap housing.
But before you remind me–yes, I miss the San Diego weather.[/quote]

As mentioned above it was per Redfin. So 20% lags SD which has been 30%. Id expect you to lag even more as your market should be more interest rate sensitive without the type of employment we enjoy here. Keeping up with demand is tough everywhere with supply chain issues so no surprise there. Unemplyment back under 5% in CA and 3.4% in SD as of March so same story here.I did find it interesting that UT has a high percentage of government workers than CA. Who wouldve thought that!

New state motto should be.

Come to Utah! Good clean government and more of it!

There always have been those leaving CA who couldnt make it here. No shame in failing, at least they tried

[barnaby33]

Though I have no hard evidence I feel like a lot of the labor shortage is really a skills mis-match. Anyone who says last years stimulus payments account for millions not wanting to work now is living in a different world. That money has long been spent. The jobs are mostly in the gateway cities and to a certain extent the increase in housing costs has ejected some folks from those places to other less costly places.

In the news today SD actually lost population this year! It didn’t help RE prices though. Probably because the vast majority of the emigrants couldn’t afford to buy houses and that’s why they left.
Josh

[The-Shoveler]

The largest Labor shortages are at the lower end of the skills/wage Jobs.

IMO I keep to my theory that for some reason TPTB are terrified of a serous recession and will do anything to avoid one.

But if the fed is allowed to really follow through on their mission, this could get real bad real fast.

Anyway Just my opinion.

[EconProf]

sdr: Interesting you say that UT has more gov’t employees per capita than CA, since CA ranks 8th in state taxes per capita ($4,424) and UT ranks 37th (2,543)–I googled state taxes per capita. I guess we pay our government employees less.
This ignores local taxes, and CA has that great Prop 13, right? The property taxes on my house are a little over 1/2% of value.
Regarding housing appreciation rates, I googled “US State Home Price Appreciation”, and Utah came in 2d in the nation at 27.05% as of end of 2021 (AZ was 1st). CA came in at 16th with 19.62%. SD undoubtedly came in better than the state average. By the same token, St. George is doing better than the state average. We are getting an influx of people from the Salt Lake City area. Some come for the weather (!), and reportedly SLC has air pollution and a homeless problem.

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