May 2, 2024

Well, the Fed made what was the most anticipated nothing move yesterday. It did nothing because its actions had resulted in nothing (yet).

People took this as a good sign—that people knew nothing was going to happen on rates—and not a great sign—that nothing is happening because of rates.

But, some underlying data is concerning.

While inflation continues to say higher than the monetarists (and debt laden consumers) want, the prices paid by producers are rising.

There are a lot of measures of prices and people see different price increases depending on what they buy. Here you see the price of goods that producers pay to make the things that we (and other producers) buy. If the cost of those inputs goes up, eventually prices have to rise.

Does this mean inflation (as measured by CPI) is going to go up? Not necessarily. Right now, services are driving the CPI measures more than anything else, so it depends on what you think producer prices will do to the cost of services.

Services are not just wages, unlike what the orthodox economists will say. Services include the replacement of the machines that service workers use. Things like computers, robots, ovens, dishwashers, rent, interest rates on debt, delivery fees, upgrades. Essentially, the inputs for the delivery of services.

With automation and the race to implement AI and new technology around automation, you see an increase cost of this seeping into the prices of services. Depending on where those input costs are growing above, the prices might materialize even in the services sector.

But, there is another side to this. If it is manufacturing input prices (i.e., production) where the input costs are going to hit, this could have several other impacts. Automation is being driven through competition. Firms are trying to deliver services and production using new tools that are coming on-line such as robotics and software-driven tracking of business processes. This drives up debt (to buy these new machines) and debt is expensive right now.

The short-term response is to lay workers off in an attempt to pay for those new machines. However, the purchases need people to implement and the productivity boost needs to materialize or the cost of all that will increase. If the productivity doesn't materialize, then (by definition) the firms have to hire back those workers they laid off.

And, we know that the promise of AI is likely to not be fulfilled for every firm trying to figure it out. That's regular competition, but the outcome of this has a rather unknown effect on prices and even output.

Input prices producers pay for making the machines and products companies buy will eventually flow through to consumers. Probably. Maybe. We shall see.

All is not great of the USA consumer, however. One gauge is how much middle income people are spending. In the USA, that means how many terrible sugary drinks they are buying at Starbucks. Well, Starbucks reported on its first quarter and it sent the share price down 16%, so you can imagine what the report said.

Working people in the USA are not benefiting from the (rather false narrative) that the USA economy is going great. We have reported on this before for workers in the lowest economic band. But, more evidence is mounting that the middle is now being dragged down as well.

According to Foxglove in the UK, workers are being bullied to end their union memebrship through a digital QR code.

Amazon has launched a new “one-click to quit the union” tool, and they’re relentlessly pushing it to every worker in their Coventry warehouse. The QR code for the tool is displayed on each table in the canteen, in every meeting and training room, in every hallway, and every toilet, as well as shown every five minutes of the working day on screens at the centre of the warehouse.

Note, if this is allowed then you should be able to scan a QR code to join a union and have that message to join sent to you by a AI system at your most union friendly times of the week (like after a bad day or your supervisor yelled at you). Of course, the process is much more complicated and would be challenged by capital immediately.

Foxglove is challenging Amazon in the UK, but we need to make sure that the program is not implemented in other workplaces.

While it is ridiculous that the employer can actively and permanently have an anti-union campaign going on like this, it should also be illegal.

The constant battle to just keep the union undermines the functioning of the union. In the same way as constant strike action would undermine the operations of the company. Either we get to a detente between the union and the employer, or the union must be allowed to engage in similarly disruptive activity.

Indeed, that is the only way to push back against such moves in the workplace.