As Fed’s battle with inflation rages on and the financial sector awaits US inflation data coming out this week there has been some alarming trends developing in other key factors that may put a wrench in Fed’s soft-landing aspirations. The key factors that could still derail the taming of inflation that are hitting the news cycle hard at this moment put the spotlight on Oil, Food, and Labor.
Oil prices are seen to be recovering from its lows as its commodity prices have been enjoying consecutive gains the past six weeks off the back of US demand and its tight supply. Increased economic activity in the US has driven Brent Crude Oil prices up to $87.55 a barrel this month up from its opening price this year of $80.36. This can be a potential pain point in the battle against inflation since economic theory dictates that as oil prices rise inflation for all other goods will follow. However, China’s recent woes as it struggles with its consumer sector failing to drive spending and slowing the Asian giant. This struggle in consumer demand then led to a decrease in economic activity that is necessary to keep their oil imports up resulting in a sort of backstop for rising oil prices.
Another sector mired not just by inflation is Food, as recent studies looking into the food insecurity issues in the US show an increasing trend of Americans unable to access food with actual nutritional value, another looming threat to food is being felt in Florida. Oranges, Florida’s most famous import, is currently experiencing record highs thanks to climate change and disease with two hurricanes hitting the crops twice last year and the spreading of ‘Citrus Greening’ has caused the prices of oranges per pound to rise above $3 whereas last year oranges were only at $1.81 per pound. Luckily, oranges aren’t considered a staple yet and is currently not a signal for overall inflation to go up again unless climate change or disease choose to impact other food commodities such as corn and meats. If the US food sector takes more hits like and more goods in the American consumer’s basket is affected will harden the soft-landing the Fed is targeting.
As prices for oil and food continue to react to global news and calamities, Labor in the US continues to be plagued by labor strikes. As the LA hotel industry, truck drivers, and other key sectors in the US join in on the recent deluge of labor issues plaguing the US market causing the number of workers striking (or have gone on strike) to be estimated at 650,000 just for the first half of 2023. For context, a recent study from Cornell put the number of workers on strike in 2022 at around 224,000. This 190% increase in workers going on strike in just the first half of 2023 could also prove to be an obstacle to the fable soft-landing as more and more US workers are opting to cross into the picket line.
Of course, there are several other factors that could impact Fed’s soft-landing goal, but these factors may have two things in common. These factors are both trending horribly for the Fed’s inflation targets and none of these factors are within the jurisdiction of the Fed’s mandate. To control money, which they have been doing with all the Quantitative Easing and Rate Hikes. Now it’s time for the private (business and consumers) and public (government agencies) sectors to make sure that the fiscal policies in place will help curb the above mentioned trend or else inflation just may get sticky yet again.