Opinion: A Mexican restaurant closed on Cinco de Mayo — are we seeing signs of the recession?
The current economy is full of contradictions. We have full employment, yet people feel insecure in their jobs; interest rates are rising, yet people are charging more on high-interest credit cards
My wife and I tried to visit our favorite Mexican restaurant earlier this month to celebrate Cinco de Mayo, but it was closed.
Finding a popular Mexican restaurant closed on Cinco de Mayo felt like finding a Fourth of July celebration without hot dogs. The world seemed a bit off kilter for a moment.
But, as I later learned, the owner wasn’t oblivious to the potential for big profits on a day normally associated with Mexican food. No, the owner was forced to close because of a labor shortage.
I’ve been collecting similar anecdotal stories from others in recent weeks.
One man told me he asked a fast-food restaurant worker why the business still offered only drive-through service at a time when pandemic fears were easing. The answer was there were too few workers to service dine-in customers.
Another person I know runs a landscaping business and has a similar problem. His workers keep leaving for better paying jobs elsewhere. To match those offers, he will have to raise his prices — which adds to the overall inflation problem.
Utahns have never had to deal with a 1.9% unemployment rate before, so we’ve never had to deal with the problems that come with fuller-than-full employment.
Too much employment may sound like the ultimate first-world problem. Everyone who wants a job can find one, and the people who run the workplaces have to worry about outbidding each other.
However, in the midst of all this full employment, people are worried about a possible looming recession. A new poll by the Deseret News and Hinckley Institute of Politics found 87% of registered voters in Utah were concerned about a recession happening in the coming year. Only 11% were not concerned, and 2% didn’t know.
More contradictions: A global survey by PwC, released this week, found 20% of workers saying they would likely switch jobs in the next year — a sign the “great resignation,” as it is known, will continue. Also, 35% said they would boldly ask for a raise during the next 12 months, according to CNBC.
Yet, at the same time, a survey by Automatic Data Processing Inc. found that only 20% of workers feel their job is secure, according to a separate CNBC report.
These make for rather strange and seemingly contradictory circumstances. To borrow liberally from Charles Dickens, this seems to be the best of times and the worst of times. It is the age of wisdom and the age of foolishness — in politics, certainly, but maybe even in the workplace.
If a recession does come, workers are likely to hunker down in their jobs, keep their heads low and make sure they don’t demand much of anything as pink slips are handed out.
In the middle of all this may be the biggest contradiction of all. According to Equifax, Americans have opened 11.5 million new credit card accounts so far this year, which is a new record. And, as Axios.com reported this week, “credit card balances are growing again.”
When money is plentiful, people want to spend. But the prudent thing to do would be to lay up in store for the bad times so many people fear are coming.
People may be excused for feeling a bit off kilter, as I did standing outside an empty Mexican restaurant on May 5. Jobs are plentiful and salaries are rising, and yet inflation is sucking the value out of all that money about as quickly as paychecks are cashed. The stock market has been on a steady decline since April, a war is raging in Europe and a tank of gas rivals what fine jewelry used to cost, and yet people keep finding the money to buy houses that seem to be on a never-ending upward cost spiral. Meanwhile, CNBC also reports that a majority of investment and economic professionals think a recession will result from the Federal Reserve’s decision to raise interest rates as an anti-inflationary measure.
The governor of Utah worries about this, too. He told reporters at a news conference this week the Fed’s efforts are “demand destruction.”
“Can we avoid a recession? I certainly hope so,” Gov. Spencer Cox said. “And any good economist would tell you though, that that’s very difficult to do.”
Uncertain times can lead to uncertain, and even contradictory, behavior. But the worst behavior of all is to rack up more debt. When the Fed sneezes, credit card borrowers catch pneumonia. Axious.com also reported that credit card interest rates have risen to 16.5% in recent weeks.
If hard times are ahead, people will wish they had acted smarter during the days of record employment, before the great resignation morphed into the great layoff.