On Sunday, former Walmart CEO Bill Simon joined Fox Friends Weekend to warn Americans about the negative impact that corporate layoffs could have on the U.S. s feeble economy.
We're stuck in a loop of wage inflation, product inflation and cost inflation. It's just that the cycle keeps going. Simon told co-host Will Cain that the inflation back under control of some of the layoffs is an inevitable byproduct of some of the Fed's moves and the necessary medicine we need to take to cool things down.
The labor market is healthy and one of the few bright spots in the economy, but there are signs that it is beginning to soften. In December, the economy added 223,000 jobs, the smallest gain in two years, as well as a number of high-profile tech layoffs over the past month.
They said they expect unemployment to climb as a result of their aggressive interest rate hike campaign. The projections from the December meeting of the central bank show that unemployment will rise to 4.6% by the end of the year, up from the current rate of 3.5%.
Cain pointed out that unemployment has to happen in order to keep pace with inflation, leading him to ask the former Walmart president if he believes layoffs will put the country back on track in order to get the economy back on track.
I agree with you, Will. The wage inflation is going on at the same time. For example, Walmart announced last week that they're raising their minimum wage, their starting wage, to $14 an hour. Simon said that was a 17% increase.
Food costs have gone up 23% in the last two years. The wages have gone up 17% at Walmart, 25 percent at Delta for pilots, 25 percent for the rail industry. We're starting to see wage increases like that to counteract the layoffs that we're starting to see. There's a lot going on. The former Walmart president brought to light a unique problem that the U.S. immigration problem has imposed on the workforce.
We need workers, but we need workers we can employ that are legal in the country. What's happening now is that you're allowing people in that can't be part of the workforce, but you're increasing demand. You have increased demand that is driving prices up without the workforce to be able to service it. He said that certain inputs are trying to solve inflation, but you have counteracting forces that mess that up.
Simon warned that consumers may be in a world of hurt if the Biden administration doesn't take action soon on the country's inflation issue.
The most critical thing that's going to happen in '23 is that we need to get this inflation under control. Another year of high single-digit, low double-digit inflation, and we're going to be in a world of hurt because inflation hurts 100% of the population, Simon said.