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Minds on the Markets
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Minds on the Markets
Archive: October 2, 2023
Gasoline Is Not the Inflation Focus. Labor Action Is.
The situation at the gas station has gotten ugly, quickly. Or has it?
Things look particularly bad out west, the region most notorious for expensive fuel costs. According to AAA, the average price of regular unleaded was $6.08 in California last week. The U.S. average is $3.81.
There was a time, a generation ago to be exact, when $4 gasoline was enough to break the back of the American consumer. American drivers first encountered a $3.81 price tag in May 2008, four months before Lehman collapsed. At the time, the housing market was already in deep recession and the unemployment rate had already started rising to 5.4%, on its way to 10% a couple years later.
However, we need to make a few considerations. Firstly, there is a big difference between $3.81 in 2005 and $3.81 in 2023. Back then, average hourly earnings were $21.47. The average at this summer’s end was $33.82.
Additionally, today’s cars are better. Consider the Toyota Camry, a car you see everywhere. For the model years 2001–2006, that vehicle’s fuel economy ranged from 24.2 to 25.1 mpg. Flash forward to the Toyota Camrys you see on the road today. For model years 2018–2023, the 100% gas-powered vehicles range from 33.6 to 36.7 mpg. As gasoline prices were biting in 2006, 2007 and 2008, drivers were simply visiting the gas station more often than they do these days.
Of course, there is more to the roadways than our own personal commutes and errands.
The UPS driver who will be delivering our kids’ Pokémons down the chimney this year has to fill up the truck too. AAA calculates diesel at $4.56 a gallon. It was under $4 per gallon from 2014 to 2022, so this is a relatively new development. But we reference UPS specifically because diesel is one thing, while the Teamsters is quite another. Their new contract will witness UPS’s seasonal drivers making $23 per hour this shopping season, up from $21 last year. The package handlers at the warehouse will see even bigger pay boosts. Transportation wages may be a bigger deal than whatever is going on with diesel.
Elsewhere, the drama between the United Auto Workers and Ford, GM and Stellantis continues. The strike started on September 15 and thus far has witnessed 25,000 UAW members walk off the job. Though it appears they came to some terms with Mack trucks over the weekend, the strike continues to expand on a seemingly daily basis with regard to the Big Three auto manufacturers specifically. With the Japanese yen having weakened to nearly ¥150 from ¥103 less than three years ago, it makes you wonder if the U.S. auto manufacturers will be able to compete with foreign competition in this strong dollar and strong wage environment.
Municipal workers are in on the action too. Maybe the 1,000 SEPTA employees who just voted to strike will cause Philadelphia to grind to a bit of a halt as 5,000 transportation workers head to the picket line this month.
The screenwriters strike in L.A. is a little bit of a different situation from the others, as it focused on the threat of artificial intelligence. Importantly, it gathered headlines, especially because Hollywood types have big follower counts on Instagram.
Perhaps the biggest deal of all is none of the above, but instead the happening-in-real-time situation with Kaiser Permanente. We may be about two days away from 75,000 health care workers engaging in a three-day strike. It is still early days on this one, but wow, it’s a big one. Widespread labor action is trendy again.
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