Skip to Content

Why companies are obsessing over worker pay

By Julia Horowitz, CNN Business

What do banks, airlines and fast food chains have in common?

They’re all keeping a close eye on rising wages, which could hold the key to where inflation heads next.

This just in: Compensation for American workers climbed 4% in the year to December 2021, the biggest increase in two decades.

Companies have emphasized as they’ve reported financial results that they don’t see this trend dissipating any time soon.

“As [we] go into this year, we are expecting that there is going to continue to be pressure on wages,” McDonald’s CEO Chris Kempczinski said on a call with analysts.

Southwest Airlines highlighted plans to hike starting wages “to be competitive in the market” as it looks to hire 8,000 more employees this year. J.B. Hunt, the trucking company, noted that due to a “very difficult” labor market, exacerbated by the extent to which drivers are exposed to Covid-19, “cost per hire is up,” as are sign-on bonuses.

“The price of labor’s going up, we’re going to have to deal with it,” JPMorgan Chase CEO Jamie Dimon, who leads America’s largest bank, said in an interview with Fox Business earlier this month.

Why it matters: Rising wages may boost costs for businesses, but they’re a positive development for workers, at least in theory. Higher wages could help reduce turnover and burnout in industries like trucking.

The full picture is more complicated, however. When adjusted for inflation, wages and salaries in the United States fell by 1.9% for the 12 months ending in December — meaning that higher prices are canceling out pay gains.

Still, wage increases are an important component of the inflation story. Today’s economy looks very different from that of the 1970s and 1980s, the last time inflation was a major problem. But economists are still on high alert for signs of a “wage-price spiral.”

That’s a damaging feedback loop in which businesses raise prices, and workers then demand higher wages to cover their bills. Should that pattern keep repeating, inflation could stick around even after supply chain blocks and other coronavirus-related factors ease.

“Labor market developments are critically important because if the psychology of higher inflation is to take root it will do so through wages and pay settlements,” Neil Shearing, group chief economist at Capital Economists, said in a research note published Monday.

While stock market turmoil “has understandably grabbed the headlines in recent weeks … it’s developments in labor markets that will ultimately determine the future path of inflation and interest rates,” he continued.

Spotify comes under pressure on Covid-19 misinformation

Spotify is under pressure after prominent artists including Neil Young and Joni Mitchell announced they’d remove their music from the streaming service due to its handling of Covid-19 misinformation.

This just in: The company said Sunday that it’s adding a content advisory to any podcast episode that includes discussion of the pandemic. The advisory will direct listeners to a coronavirus hub with links to trusted sources.

It will also publicly share its platform rules, which had been for internal use.

“We know we have a critical role to play in supporting creator expression while balancing it with the safety of our users,” CEO Daniel Ek said in a blog post. “In that role, it is important to me that we don’t take on the position of being content censor while also making sure that there are rules in place and consequences for those who violate them.”

Under the microscope: Young initially called out Spotify because of its relationship with popular comedian Joe Rogan, whose podcast has spread misleading and inaccurate claims about vaccines and the virus. Spotify has a deal to exclusively host “The Joe Rogan Experience.”

In a video on Instagram posted Sunday, Rogan said he’s “happy” with the idea of adding advisories before podcasts that tackle Covid-19.

“I’m not trying to promote misinformation, I’m not trying to be controversial,” Rogan said. “I’ve never tried to do anything with this podcast other than to just talk to people.”

Investor insight: The controversy doesn’t appear to be spooking investors. Spotify’s stock is up almost 3% in premarket trading. But shares have been walloped this year amid a broader selloff in tech companies. They’re down 26% over the past month.

Wall Street gives Visa and Mastercard some love

On Friday, Visa’s stock leaped almost 11%, while Mastercard shot up 9%.

Driving the jump? Both companies posted solid earnings from their most recent quarters and said they don’t expect the highly contagious Omicron variant to ding spending.

“We do not believe the current surge in the pandemic will curtail the recovery,” Visa CEO Alfred Kelly said in a statement. “We see economies around the world continuing to improve and, as restrictions are lifted, cross-border travel will continue to recover.”

Visa said that cross-border spending related to travel skyrocketed 102% year-over-year and now stands at 72% of 2019 levels.

Mastercard reported that total cross-border volume surged 53% last quarter.

“While Omicron has had some recent impact on cross-border travel, we continue to believe that cross-border travel will return to 2019 levels by the end of this year,” CEO Michael Miebach said on a call with analysts.

Mastercard’s shares are up 6.5% this year, compared to a 7% drop in the S&P 500. Visa has rallied more than 5%. American Express is doing even better, climbing 8% year-to-date.

Up next

The Chicago Purchasing Managers’ Index posts at 9:45 a.m. ET.

Coming tomorrow: Earnings from UPS, Google owner Alphabet, Electronic Arts, Starbucks and PayPal.

The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

Article Topic Follows: Life

Jump to comments ↓

Author Profile Photo

CNN Newsource

BE PART OF THE CONVERSATION

KIFI Local News 8 is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content