Pocketmint

small change toward a rich life
8
August
2008

Inflation or unemployment: pick one

The last time the economy took a sharp downturn it hit me hard. With dot-coms failing right and left, suddenly there was a huge glut of Internet-industry workers. Employment levels took four or five years to fully rebound, during which I got by on intermittent income and credit-card debt.

This time, though Jak and I both work in Internet-related jobs, they both appear stable for the long term — and if one of us needed to find a new job, the market for our skillsets still seems pretty decent. We are making enough money relative to our expenses that we can afford the occasional decadent splurge and still continue to accumulate substantial savings. We aren’t needing to sell our house anytime soon, so even if prices flatten for a bit, it shouldn’t impact us much.

I am noticing the sharp uptick in food and gas prices but am generally able to absorb them. Still gunshy after the Dot-Bust years, I’ve been feeling lucky that this time we seem to be well-placed to ride out the fall. But a recent article in Forbes suggests that my experience is exactly typical for Seattle, which has the highest inflation rate in the country:

While Seattle’s housing market has shown signs of strain, it’s still a far more stable market than most cities in the country. But the simplest reason for inflation is the health of the local economy. When metro area unemployment sits at a rock bottom 3.7%, it’s an employee’s market for wages, because talent is tough to come by. Higher costs for labor on the manufacturing or service side, and more cash in the hands of the consumer, means prices can float higher without much resistance.

So wait — prices are climbing faster here in Seattle because … we can afford them? What a Catch-22. If we couldn’t afford the price increases, things would be cheaper … but a lot more people would be out of work. Like in Detroit, where “unemployment is over 8%, the highest of any big city in the country, and yet inflation rests at the lowest level of cities we measured.” You just can’t win.

Anyway, I’d much rather be here than in Dallas, which ties our 5.82% inflation rate. According to Forbes, it’s not a robust economy but heavy energy use that’s driving up prices there. “There just isn’t much you can do if you live in Dallas and want to conserve energy. Driving is a way of life and … the city is so spread out that residents are traveling long distances. Add in the summer heat and humidity, and Dallas citizens are pumping the air conditioning non-stop.”

Hey, Seattle — bring on the light rail and the clouds!

(Photo by The Lebers.)

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One response

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  1. Dorita says

    I, as a Spaniard, can see how huge the problem is in my cotunry.Lots of friends and also relatives of mine (and now I’m not only talking about youngsters) have big problems on finding a job + lose their old jobs + less salary.So, the generation of the 30 (years old) as we say in Spain have this problem: They finish their University Studies and they have 2 choices: Continue with masters (if it’s possible) or go abroad to find a job.Most of them try in the U.K., Germany or even in the U.S.They feel sad and even embarrased to have to leave their cotunry and home in order to make a decent living.It is really hard nowadays. I could explain more but as you may know, it is a big issue.



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