Employment trends expert Rob Wilson weighs in
The threat of stagflation continues to loom large over the economy. When June’s jobs report was released last Friday, it revealed that employers hired more workers than expected. While this was good news, it also gave the Federal Reserve the justification to raise interest rates in a bid to fight continued inflation.
“While the June jobs report was positive, it has led to a plan to increase interest rates by 75 points,” says Rob Wilson, President of Employco USA and employment trends expert. “The theory is that raising interest rates will curb spending, thereby causing spending to decline and demand to fall. Unfortunately, this is a plan that is conceived to combat inflation, but we have no economic tools in place to fight stagflation.”
Stagflation is an economic state in which employment rates fall as inflation rises.
“Stagflation occurs when inflation combines with high rates of unemployment and slow economic growth to create the perfect economic storm,” says Wilson. “The United States has not undergone a time of stagflation since the 1970s, when an oil embargo and fiscal policies led to stunted economic growth and catastrophically high prices. Now, we find ourselves facing a similar economic travesty.”
Wilson says small business owners will be hit hardest by stagflation.
“In order to boost the economy and get people working again, lawmakers are really going to rely on and reward big corporations who have the ability to absorb higher interest rates and lower profit margins. It will be the everyday American employer who is going to have a real battle to attract and retain staff, all while trying to pay a competitive wage.”
In fact, says Wilson, this is why many people are saying that the cure for stagflation might be to cap wages or set price controls.
“These solutions aren’t very popular, for either employees or employers,” says Wilson.
So, what can employers do to safeguard their businesses during a time of stagflation?
“Look for opportunities wherever you can. Whether that means reducing shipping costs, using less energy, improving your supply chain, or investing in software to improve your workers’ productivity, now is the time to think outside the box. And try to reduce your debt as much as possible because skyrocketing interest rates are going to be a death knell for a lot of companies,” says Wilson.
For more on this topic, please contact Rob Wilson at rwilson@thewilsoncompanies.com.