Now we got to talk about the wage price spiral and the potential of a wage price spiral. continuing. Remember, a wage price spiral is the worst thing that you could experience because it leads the Federal Reserve to have to force a deep and dirty recession. They will smack us up beside the head, the dirtiest with the dirtiest smack and dirtiest nasty sticky hand you could ever imagine.

You don't want a wage price spiral. It's very important to remember. What you want is you want people to build their wealth and incomes over time. Ideally, people build their income slightly due to inflation slight increase to year over year, but mostly due to providing more value to wherever they are providing their labor.

That is good, healthy wage growth. We want people to make more money over time to offset slide inflation, but we also want people to make more money when they provide more value. That is the American way. Nobody is suggesting that we don't want people to make more money, but what we don't want is the growth of wages to be so rapid that all of a sudden we create unsustained inflation where people are being paid and compensated substantially more for working less or not working at all.

A wage price spiral can then ensue, which leads to a nasty depression or deep recession, much like what we saw in the early 1980s when Paul Volcker had to raise interest rates to 20 percent to crush the wage price spiral. and that led to a lot of layoffs. Remember the goal of investing and the goal of economies and capitalism and government is to operate in the mean. We don't want a government that has their heads completely in the sand and only does one thing.

We want a government that operates in the middle much like we want wage growth to be fair and reasonable and in the middle, we don't want extremely high wage growth because that could lead to a wage price spiral and then job loss. We don't want really low wage growth because that means people are falling behind and suffering. So where do we stand today on wage inflation And what are the odds of wage inflation potentially falling? Well, this is very, very important. and Goldman Sachs has just released a piece on three leading indicators of what caused inflation in wages and where those indicators are going and we're going to go through exactly this: Goldman Sachs piece to see what their thesis is.

Now remember if you like my perspective, make sure you join me in the course member live streams every day the market is open or on the weekend for the elite. Hustlers courses on Saturday to build your income as an employee or as an entrepreneur. But Monday through Fridays we do the course member live stream where we do fundamental analysis on real estate and investing. We talk investing Trends and ideas and volatility and charting, you name it.

Also, it's an opportunity to answer q A I Also encourage you to check out the lectures on building your wealth that come with those course member live streams whether it's the Zero Millionaire Real estate Investing course or the stocks and Site course. We've got a flash sale expiring on investor day, which is tomorrow. All right, let's take a look here. So Number One Inflation expectations elevated inflation and inflation expectations over the last year likely drove workers to bargain for higher wages to make up for lost purchasing power.

It's difficult to identify the effect of inflation expectations on wage growth as there is no way to disentangle the true inflationary pressures on wage growth. But basically leading indicators suggest that when we look at one year inflation Expectations by the consumer which this is not what's estimated by the bond market like break evens, but rather we look to the one-year inflation expectations for the University of Michigan. When we look to short-term inflationary expectations, we could see that if it's possible that wages increase because consumer expectations of inflation were Rising therefore leading to them to in aggregate demand higher wages, then we should be able to look at that one year inflation expectation chart and also say that number one most important inflation expectations are starting to plummet. That plummeting of inflation expectations could reduce that upward wage pressure that we are seeing from individuals.

Individuals moving to lower inflation expectations could actually help us see a reduction in wage inflation back to normalcy in English. This is very good news. We have one large indicator here out of the three indicators we're going to look at suggesting that wage inflation is likely to decline. Neither of the three wage indicators that we are going to look at here have anything to do with Supply chains or other of the inflationary impacts.

This is solely on wages and inflation expectations Falling could beget less wage inflationary pressure per Goldman Sachs And that is fantastic. This is again not to say we don't want people to make more money or build their wealth. Too many people who try to put on a political lens and go, oh, you just want people to make this money wrong. We want people to make more money.

especially people who provide more value because that's the smart way to provide more money or provide to build your wealth. Because if you don't provide more value and you just demand more wage increases, you'll end up getting replaced by a robot or a chat bot when you get fired by somebody who's willing to work harder. That's very important. You might temporarily win working the same amount and getting paid more, but you'll never win in the long run.

It's very important that you always provide more value, but when it comes to inflation expectations on the market, it's very clear that Goldman Sachs tells us on a one out of at least one out of their three indicators is suggesting that wage disinflation is coming. It might take time, it might take patience, but it is obvious the inflation leading indicators are suggesting that wage growth is going to moderate further. Number Two pandemic related normalization. as we pointed out last year covid related labor market policies, pandemic bonuses, and coveted related labor market disruptions likely contributed to elevated wage growth in 2021 and early 2022.

Specifically, temporary fiscal measure during the pandemic. especially the enhanced unemployment benefits in the extended and expanded child tax credit likely led to very strong wage gains gains from that last summer through last winter in low-paid sectors where fiscal transfers replaced a large share of normal wages. In addition, many companies appear to have offered workers larger than usual pay increases as compensation for pandemic hardship and to incentivize them to resume normal work practices in English. Maybe it was a bad idea to pay people four to six hundred dollars a week to stay at home and do nothing, because that meant businesses who relied on labor had to pay substantially more money to get people back to work, and even after those benefits went away because of the expanded child tax credits which were still running substantially in 2022.

Maybe all of a sudden you're out or the stimulus checks that California stupidly sent out in October of 2022. Maybe you actually just replenished the excess savings that people had and still have today, making them less likely to return to work, leading to massive wage inflation and worker shortages. Now, thankfully, that trend is finally turning around. Companies like Chipotle and Starbucks are suggesting: it's easier to hire and retain workers.

less turnover, easier to find people. Cloudflare had 1300 job openings in 2022. Guess how many applications they receive out of 1300 openings? 400, 000 applications Uber is seeing a 37 increase in the number available available drivers Lyft is seeing an extreme increase in the amount of available drivers and so all of a sudden labor is now chasing fewer available jobs. However, this takes a while to actually show up in our data.

It's going to take a while to see this disinflationary impetus thanks to our incompetent government having spent as much money as they did supporting people for doing nothing now. I'm not saying that was a bad thing. I was a big fan of breaking down all of the ways that you could make money from the government, because even if they're stupid, I'm happy to make sure you can take advantage of those aspects. But what I don't want you to do today is be blind to think that uh oh, we are going into a wage price spiral so far.

The indicators of that are: absolutely no Inflation from a wage point of view is absolutely pointing in a disinflationary direction. How long it takes is the real question, but the Federal Reserve is paying attention to this. so. Number One: Wage Expectation Inflation declining.

We see the chart here. Not only that, but as we normalize away from these pandemic support programs which seriously, we're still going on under 10 Inflation Five months ago. Basically near 10 inflation Five months ago in California and in other parts of the country, those are finally starting to normalize. It's insane.

You should send a letter to Gavin Newsom and go, you dumb idiot. You made inflation worse when it already was nine percent, you dumb nut. But that's okay because we know he's an idiot. but he's an idiot who'll probably end up running for office in the White House one day.

And hopefully you realize that during the highest inflation, he sets stimulus checks to people making up to five hundred thousand dollars to buy votes. And now what's California Oh California is going into potentially a large budget deficit? Oh wow, no surprise. the taxpayers who were actually making money are fleeing the state and they're leaving to different areas now, all of a sudden, paying the government less money. And so what do you actually have? Gavin Newsom predicting a massive budget surplus, But instead of actually getting a surplus, what we actually end up having is a projected deficit for California of 22.5 billion dollars striking downturn from the surplus of last year thanks to not only coveted money that the government massively double counted in political rallies, but also massive capital gains as the biggest winners of the covet handouts ended up being wealthier people in the form of ridiculously expensive IPOs stock surges and real estate appreciation which led to massive and temporary surges in capital gains in California Now, I've got to continue here with: Goldman Sachs Third warning on wage disinflation.

This is very important. So what is the third warning? Well, the third warning here is the one that's lagging the most and is taking this the longest amount of time to normalize. but it has to do with the Jobs Worker Gap We're still at the highest, the second highest level in the gap between the amount of job openings and the workers who are taking those jobs. However, Goldman Sachs makes it very clear it takes a long time for this Gap to actually affect the wage rate.

and fortunately, if we actually if we ignore the government's measure of the job openings and Labor Turnover index, the Jolts report we actually look at the Alternative Jobs Openings data which is brought to you by like the real economy rather than the government's crazy adjusted data we can look at Indeed.com and Linked UP Job Openings. What We do take a look at this: What do we see? Ah, how interesting. A very clear downtrend in that light blue line of the actual and Alternative Job Openings data. So while unfortunately, this is moving down very slowly, it gives workers plenty of an opportunity to sort of reshift to the job and workplace and in the environment.

They actually want to be in for the long term. But this downtrend is really important to pay attention to because it is yet the third indicator that massive wage disinflation is coming. Remember, disinflation is the decline in the inflation rate and this massive disinflation coming. And and all three of these aspects of massive wage disinflation make it very, very clear that yes, even though it's going to take months to get these declines actually showing up in real data, it's very clear that three out of three of the indicators that Goldman Sachs is looking at for the risk of wage price spiral are clearly telling us no wages are not going to cause a wage price spiral.

Anyone betting on a wage price spiral is not paying attention to the data. They're paying attention to lagging and anecdotal reports or massively seasonally adjusted reports like the Bureau of Labor Statistics report which is seriously just looking in the rearview mirror. So this is good news. This is bullish news.

Now, it doesn't mean we want to YOLO and be crazy, not bet on volatility in the short term. I've said it before and I'll say it again. I Believe we are in a Nike Swoosh recovery that is going to be very volatile now. Unfortunately, when people hear me say Nike Swoosh recovery they, they literally just think to themselves, okay, Nike Swoosh Recovery Down Fast Oops down fast and up slower.

Got it? But they're not listening to me. What? I say it's going to be very, very volatile and very bumpy I Do think we're going to continue to Trend up at this point I'm not absolutely saying we won't hit a lower leg. That's possible I Just think it's unlikely based on the leading data that we have. and the Federal Reserve is not blind to the leading data as much as they might seem that way.

In my opinion, the Federal Reserve is putting on an act of not paying attention towards the leading data because they want to keep the 10-year treasury yield. High Because that crushes real estate and by crushing real estate, you crush demand. And that's what they want to do to make sure that real estate or that Services Inflation Inflation in general stays anchored in inflation. Expectations stay anchored.

but you even have one of the Bears like Loretta Mester you turning on this idea that oh yeah, we're definitely going for 50 BP she quickly u-turned on that after widely being quoted as being interested in 50 BP She clarified that away so quickly, but very few people are paying attention to it. but I am and I hope that's why you continue to subscribe, support the channel, and share the videos.