May’s economic data captured some of the re-opening difficulties facing the economy today, with labor shortages, wage and price inflation, and ever-changing rules and regulations creating a challenging environment for businesses of all types.

Labor continues to be cited as a key restraint on the economy right now. Expanded federal and state unemployment benefits have encouraged many lower-wage workers to opt for the sidelines, forcing many travel and leisure businesses to cut back on capacity and service. The JOLTS (US Job Openings by Industry) number for March hit it’s highest level on record, indicating more the 8.1 million job openings here in the US. Anecdotally, nearly every business owner we speak with cites the inability to hire workers as the biggest challenge they are facing. The Unemployment Rate for April came in at +6.1% and the Underemployment Rate held at a stubbornly high +10.4%.

Compounding labor shortages is the dramatic rise in input costs, which was highlighted on one earnings call after another during the recent quarter-end announcements. CPI for April was up +4.2% YoY while PPI surged +6.2% YoY. The Fed’s favored metric, the PCE Deflator rose +3.6% YoY. Despite these rises, the Fed insists that recent inflationary pressures are “transitory”, meaning they are unlikely to persist over the longer term (whenever that is).

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