I’ve asked more than once why certain people act as if we are in desperate need of immigrants to come here and work. Tom Donohue, the President and CEO of the Chamber of Commerce, actually said that we must have immigration “reform” as soon as possible in order to get “a full and diverse work force” in the United States. He made other statements that made it sound like we had a crisis in the United States of people desperately trying to get workers for new jobs.
It seemed delusional.
But then I saw this report from CNBC: “Siegel: I’m a bull, but these two things worry me.”
Jeremy Siegel is one of the most famous market bulls, and he reiterated his positive take on Tuesday with a call for the Dow Jones Industrial Average to rise to 18,000.
I think Siegel is delusional to be positive about this economy, even if nominally the Dow Jones Industrial Average does reach that high.
But what the report said next completely floored me:
But he also mentioned two things that worry him right now: a potential lack of slack in the labor force, and commodity prices.
A “lack of slack” would mean there aren’t people with nothing to do who are hoping and praying to be hired. We are in danger of a “lack of slack” in the labor market?
Siegel’s other concern, which also pertains to rising costs, is the labor force.
While many complain that the unemployment rate looks artificially low due to the unusually low participation rate, Siegel frets that it could actually be lower than the stated 6.6 percent.
That might sound like good news, but it would mean that if companies need to hire additional workers, then they need to raises wages. That would put a serious damper on the corporate profits that undergird stock prices.
“The labor market—even though the unemployment rate is 6.7 percent, 6.6 percent—it might be tighter than we think,” Siegel said. “We might be closer to a bottleneck there—although we are seeing no wage increases—than we are concerned [about]. And that does concern me. Because these optimistic earnings estimates won’t be reached unless we still have slack in the labor market to employ people.”
That this got reported as intelligent commentary at CNBC blows my mind. Do people really think we are facing a labor shortage? That sounds completely insane.
Also, how can he mention the threat of needing to pay people more and not mention the threat of a minimum wage being raised? Perhaps this is why CEOs think a minimum wage law won’t be that disruptive. They think wages will be driven up anyway.
That makes sense but I still can’t believe anyone really thinks this economy has high enough employment and job opportunities to drive up wages.
But most outrageous is his openly-stated hope that people get paid less in order to increase corporate profitability. I am fine with corporate profits and wages being set by the market. But it is ugly to wish lower wages on people so that you can make more money in your stock portfolio.
It also makes no sense. If wages rise for real reasons (not a minimum wage law) then they will provide new purchasing that will stimulate business.
I obviously can’t explain Jeremy Siegel’s craziness. But it does fit with the strange arguments coming from Tom Donohue which assume that we are facing a labor shortage.