US inflation slows to 6.4%, but price pressures re-emerge

[Metaphorical]

3. Russian / Ukraine War and Labor Shortages

Grain costs are dropping, but UKR/RUS is still disrupting global markets. I also suspect that we're beginning to see one impact of declining birth rates: the emergence of persistent inflation. Fewer people are entering the workforce, even as the Boomers become overwhelmingly retired. Boomer births peaked in 1954, which means that half of them hit 65 in 2019, so we're somewhere near 60% retired at this point. The population is still growing (due primarily to immigration) but the number of workers is dropping.

Why is this inflationary? Fewer workers translate into fewer farmers, factory workers, truck drivers, dock workers, and so forth, which is pushing wages up in these areas. At the same time, investors continue to demand that they get paid their dividends. This means that business owners are pushing wage increases into their overall prices, even as product stacks up on the shelves.

This is an untenable situation. Profit margins are getting squeezed, and eventually it will not be profitable for many companies that were already marginal to remain in business. Automation is one solution, but it costs money to automate, but investors are likely to see little return on their investment in that scenario (even though that's where their money is most needed). Couple that with the fact that more people are now on fixed income (see Boomer retirement above) means that they are now drawing down their nest eggs, not contributing to it. Less institutional money means more downward pressure on the exchanges.

My suspicion is that we're going to be facing 4-5% inflation for the foreseeable future.