Inflation 2022- Todd Hirst Year Ahead
I love that the Chamber hosts Todd Hirst every year to talk about the year ahead and what he sees for the future given all his knowledge in economics. He is an out-of-the-box thinker and a local boy from Wetaskiwin. His daily newsletter, The Owl, is a highlight for me to wake up to every day.
For his presentation this year, he talked about three narratives we need to pay attention to in the coming year:
- Resources are the source of wealth
- You get a job to earn income
Let’s touch on this one by one.
Resources Are the Source of Wealth
Resources may be the source of wealth, but Todd had a very interesting point in that it’s not the resources that matter, but the labor that mines the resources. In Alberta, we have had so many innovations that are changing the way we produce labor. He kept referring to the productivity, creativity, innovation, and good ideas of our workforce. It brings me back to the tech sector development that is really taking our area by storm. All this innovation is driving a lot of our economy and is worth taking note of moving forward.
You Need a Job to Create Income
This point was about the evolution of job to career and then a second career. The introduction of employment insurance and living longer after retirement is factors that we need to pay attention to. We also need to be asking questions like, “Does this job make me happy? Is this what I want to do with my life?” The answers to these questions are playing into the job market today and will continue to do so into the near future, at least.
Inflation is a word we are hearing all the time now, and I have done a blog and a Tarah Talks on it already, so please make sure you check those out. In Canada, it is stated that we are at a 20-year high with the current inflation rate and that the U.S. is at a 40-year high. This is brought about by four circumstances.
Supply chain disruptions: With factories closing and having lockdowns, the lack of availability of many goods leads to higher prices given the basic laws of supply and demand.
Food production: Global climate change and crop failures all over the world are resulting in the price of some goods rising, and this is only going to get worse as they are forecasting crop failures for the next few years.
Help wanted: The lack of staff and the amount of people leaving the job force has many companies increasing their wages to get employees to come back to work. These additional labor costs will be passed to the consumer via higher prices to compensate.
Pent-up consumer demand: Many people have been saving their money during the lockdowns as they couldn’t go out and spend it in shops and restaurants or on travel. So, there is a lot of pent-up consumer spending where they are waiting for the right opportunities to spend their money.
In one of his final comments, Todd mentioned that usually, the increase in interest rates would curb this kind of inflation, but an increase in interest rates from the Bank of Canada would actually only curb the pent-up consumer demand. All the other factors that are creating inflation are not within the Bank’s control. He did state that the interest rates from the Bank of Canada would likely be higher in April and May, so there should be consumer rate increases over the next year-and-a-half, but he said that it shouldn’t get to the same interest rates that we have seen in the past.
Inflation in 2022 may continue into the following year as well, but we can only wait and see how these different factors interplay with each other. It’s always good to take what Todd Hirst says about economics into consideration! If you’re in the market to buy or sell your home in the Leduc area, let’s chat and see how we can best navigate these turbulent times together.