LEGISLATIVE REPORT

behavior in 2020. Th e quit rate for 2021 has jumped to a record high of 26%, as trended in the chart at the top of page 4.

Currently, infl ation is growing faster for producers than for consumers. Th e producer price index for December was 9.7% higher than in the prior December, compared to the CPI’s 7% growth over the same period. Th e bottom chart on page 4 shows this trend and illustrates how higher producer prices end up costing consumers more over time.

Th e top chart at right shows average hourly earnings by industry for December 2021. Total private employee wages are now growing at 4.7%, nearly double the 2.4% growth rate over the last economic cycle. Th e manufacturing sector now reports the largest number of unfi lled job openings on record.

While the growth rate varies by industry, independent box converters can anticipate that their customers will be facing pressures much like those currently being felt in the corrugated industry. Historically low wages in the leisure and hospitality sector are the prime driver for the most rapid rise in their earnings. Wages in the manufacturing sector, which has the largest share of corrugated consumers, have been growing at a 4.4% rate, almost twice the average growth rate as during the last business cycle.

Th e middle chart at right expands on the overall 9.7% rise in the PPI in December 2021 to show the range of growth of some key commodities and products. Recycled paper has increased the most but is a good example of a commodity whose price can change rapidly, depending on market pressures.

Th e fi nal chart depicts the high growth rates of selected consumer products. Gasoline’s hefty increase from December 2020 refl ects the comparison to the many fewer miles traveled in the prior year.

To sum it up, inflation will be a top-of-mind issue for consumers and corrugated converter customers for the next year and more, as interest rates are set to rise and while supply chain bottlenecks become unclogged. What remains most unclear presently is how much initiatives to tamp down infl ation will also weaken overall economic growth. 

(% Change, December 2020-2021) (Total Private Prior Business Cycle = 2.4%/yr)

Leisure & Hospitality Transportation & Whsg Retail Wholesale Total Private Construction Manufacturing Mining & Logging Information Technology 5.60% 5.40% 4.80% 4.70% 4.60% 4.40% 3.30% 2.40% 14.10%

0.00% 5.00% 10.00% 15.00%

Source: Bureau of Labor Statistics

Change in Producer Prices December 2020-2021 (Overall Change = 9.7%)

Recyclable Paper Wheat Industrial Chemicals Slaughter chickens Plastic Construction Prod Truck Freight Consulting Services Warehousing Services 55% 47.90% 46.10% 32.50%

16.30% 15.80% 16.60% 127.70%

0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% 140.00%

Source: Bureau of Labor Statistics

Change in Select Consumer Prices

December 2020-2021 (Overall Change = 7.0%)

Gasoline Used Vehicles Beef Steaks Bacon Lodging Furniture Eggs Fresh Seafood Apples Total 21.40%

19%

13.90% 11.80% 11% 10.20% 7.80% 7.00% 37.30% 49.60%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% Source: Bureau of Labor Statistics

Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.