‘Fast Food’ restaurants no longer fast, affordable or even convenient


Important Takeaways:

  • ‘What HAS the world come to?’ McDonald’s customer is left outraged after being charged $7.29 for single Egg McMuffin at Connecticut restaurant
  • A McDonald’s customer was left astounded after paying $7.29 for a single Egg McMuffin in a Connecticut drive through.
  • Bespoke Investment Group posted a picture of the customer’s receipt with the caption ‘$7.29 for one McDonald’s Egg McMuffin. What has the world come to?? These were 2 for $2 pretty recently.’
  • The bill records the purchase of two Egg McMuffins for $14.58 and one Bacon, Egg & Cheese McGriddle without two half-strips of bacon for $7.19.
  • The incident is even said to have spooked the Biden administration after critics claimed it was yet another symptom of the soaring inflation that has hurt millions of Americans’ pockets.
  • McDonald’s was among the many other fast-food chains that raised their prices in 2021 to account for inflation and increased labor costs.

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Nearly half of small businesses freeze hiring during rise in inflation

Revelations 18:23 ‘For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • 45 Percent of US Small Businesses Freeze Hiring Amid Soaring Inflation, Labor Costs
  • About 45 percent of small-business owners in the United States are freezing the hiring of new workers because of high labor costs and skyrocketing inflation, according to the Alignable July Hiring Report.

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U.S. weekly jobless claims near 20-month low; labor costs surge

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 20 months last week, suggesting the economy was regaining momentum amid a significant improvement in public health, though supply constraints remain.

The tightening labor market is driving up wages as companies scramble for workers, contributing to keeping inflation high. Labor costs surged in the third quarter, other data showed on Thursday, with productivity sinking at its steepest pace in 40 years. The Federal Reserve announced on Wednesday that it would this month start scaling back the amount of money it is pumping into the economy through monthly bond purchases.

“Firms are reluctant to lay off workers with strong demand and labor in short supply,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “The big open question is what is happening to the millions of people who lost their benefits in September, or saw their benefits drop.”

Initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 269,000 for the week ended Oct. 30, the Labor Department said. That was the lowest level since the middle of March in 2020, when mandatory business closures were being enforced to slow the first wave of COVID-19 infections. Claims have now declined for five straight weeks.

Unadjusted claims, which economists say offer a better read of the labor market, fell 7,114 to 240,216 last week. There were significant declines in filings in Missouri and Florida, which offset increases in California and Kentucky.

Claims in Kentucky were likely boosted by temporary layoffs in the automobile sector as motor vehicle manufacturers cut production because of scarce semiconductors.

The summer wave of infections driven by the Delta variant has subsided, encouraging more Americans to travel, dine out and frequent sporting venues among activities that were curtailed by the resurgence in cases. The Delta variant and shortages of goods contributed to restricting economic growth to its slowest pace in more than a year last quarter.

Claims, which have declined from a record high of 6.149 million in early April 2020, are now within a range that is generally viewed as consistent with a healthy labor market.

The number of people continuing to receive benefits after an initial week of aid dropped 134,000 to 2.105 million in the week ended Oct. 23. That was also the lowest level since the middle of March in 2020. The number of people receiving aid has declined by around 75% since early September when government-funded benefits expired.

Falling claims augur well for October’s employment report due on Friday. According to a Reuters survey of economists, nonfarm payrolls likely rose by 450,000 jobs. The economy created 194,000 jobs in September, the fewest in nine months.

U.S. stocks opened higher. The dollar rose against a basket of currencies. U.S. Treasury yields fell.


Expectations for an acceleration in job gains were bolstered by the ADP National Employment Report on Wednesday showing strong growth in private payrolls in October. The Conference Board’s labor market differential – derived from data on consumers’ views on whether jobs are plentiful or hard to get – hit a 21-year high.

But relentless worker shortages remain an obstacle. Caregiving needs during the pandemic, fears of contracting the coronavirus, early retirements and careers changes as well as an aging population have left businesses with 10.4 million unfilled jobs as of the end of August.

Fed Chair Jerome Powell told reporters on Wednesday that “these impediments to labor supply should diminish with further progress on containing the virus, supporting gains in employment and economic activity.”

There are concerns that the White House’s vaccine mandate, which applies to federal government contractors and businesses with 100 or more employees, could add to the worker shortages.

A report on Thursday from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S.-based employers increased 27.5% in October to 22,822, the highest since May. It said 22% of the layoffs were people who refused to be vaccinated as per company requirements.

“The issue could push people out of the labor force or slow re-entry as people extend their searches for either employers not enforcing the mandate or workplaces where it doesn’t apply,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

With workers scarce, companies are raising wages. A second report from the Labor Department on Thursday showed unit labor costs, the price of labor per single unit of output, increased at an 8.3% annualized rate in the third quarter after rising at a 1.1% pace in the April-June quarter.

Labor costs rose at a 4.8% rate compared to a year ago. The report followed on the heels of news last month that wage growth in the third quarter was the largest on record. Strong wage gains, together with rising rents, challenge the Fed’s narrative that high inflation is transitory.

“The rise will add to concerns about inflation becoming more entrenched and/or the growing risk to profits, as businesses are not able to offset higher wage costs via productivity gains,” said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina.

Worker productivity fell at a 5.0% rate last quarter, the biggest drop since the second quarter of 1981. That followed a 2.4% growth pace in the April-June period.

A third report from the Commerce Department showed the trade deficit surged 11.2% to a record $80.9 billion in September.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. labor costs accelerate in the first quarter

WASHINGTON (Reuters) – U.S. labor costs increased more than expected in the first quarter as wage growth picked up, further evidence that inflation will push higher this year as the economy reopens.

The Employment Cost Index, the broadest measure of labor costs, jumped 0.9% last quarter after gaining 0.7% in the October-December quarter. That lifted the year-on-year rate of increase to 2.6% from 2.5% in the fourth quarter.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation as it adjusts for composition and job quality changes. Economists polled by Reuters had forecast the ECI rising 0.7% in the first quarter.

Wages and salaries shot up 1.0% after advancing 0.8% in the fourth quarter. They were up 2.7% year-on-year. Economists expect wages will increase further in the second quarter as companies compete for scarce workers.

Despite employment being 8.4 million jobs below its peak in February 2020, businesses are struggling to find suitable workers as they rush to meet robust domestic demand.

Federal Reserve Chair Jerome Powell on Wednesday acknowledged the worker shortage saying “one big factor would be schools aren’t open yet, so there’s still people who are at home taking care of their children, and would like to be back in the workforce, but can’t be yet.”

Higher wages, if the worker scarcity persists, could contribute to boosting inflation this year, though many economists and Powell believe the anticipated surge in price pressures as the broader economy reopens will be transitory.

(Reporting By Lucia Mutikani)

U.S. third-quarter productivity pared; unit labor costs revised up

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. worker productivity increased strongly in the third quarter, though the pace of growth was likely overstated as the sharp rebound in output from the COVID-19 pandemic recession has far outpaced employment gains.

The Labor Department said on Tuesday nonfarm productivity, which measures hourly output per worker, increased at a 4.6% annualized rate last quarter. The slight downward revision from the 4.9% pace estimated last month followed a 10.6% rate of growth in the second quarter, which was the fastest since the first quarter of 1971.

The economy expanded at a historic 33.1% annualized rate in the July-September quarter, thanks to more than $3 trillion in government pandemic relief for businesses and workers. That followed a record 31.4% pace of contraction in the second quarter. Strong productivity explains the divergence between GDP growth and the labor market.

The economy has recouped two-thirds of output lost during the coronavirus crisis, while only about 56% of the 22.2 million jobs lost in March and April. A wide gap between output and employment is not unusual during recessions, with a similar trend observed during the 2007-09 Great Recession.

Economists polled by Reuters had forecast productivity growth would be unrevised at a 4.9% rate in the third quarter. The COVID-19 downturn has decimated lower-wage industries, like leisure and hospitality, which economists say tend to be less productive.

According to Moodys’ Analytics chief economist, Mark Zandi, there has been a shift in economic activity to big companies from small and medium-sized retailers. Zandi also noted that big businesses across industries are taking advantage of the pandemic to aggressively implement labor-saving technology.

“The underlying rate of productivity has not shifted from what it was before,” said Zandi. “There is no fundamental shift in productivity growth going forward, but it means it’s going to take a while to recover all the jobs lost unless we have good policy in place.”

U.S. financial markets were little moved by the data.

Compared to the third quarter of 2019, productivity increased at a 4.0% rate instead of the 4.1% pace reported last month.

Hours worked rebounded at a 37.1% rate, rather than the 36.8% rate estimated in November. That followed a record 42.9% pace of decline in the second quarter.

Unit labor costs – the price of labor per single unit of output – plunged at a 6.6% rate instead of an 8.9% rate as previously reported. Unit labor costs rose at a 12.3% pace in the second quarter. They increased at a 4.0% rate from a year ago.

“The big swings in the unit labor costs data in recent quarters make it hard to detect an underlying trend, but overall we think that the shock to the economy coming from COVID-19 should weigh on employee compensation,” said Daniel Silver, an economist at JPMorgan in New York.

Hourly compensation fell at a 2.3% rate last quarter, instead of a 4.4% pace as previously reported. That followed a 24.3% rate of acceleration in the second quarter. Compensation increased at a 8.2% rate compared to the third quarter of 2019.

(Reporting by Lucia Mutikani; Editing by Andrew Heavens and Andrea Ricci)

Higher wages, fuel prices turn up cost pressure on airlines

A plane is seen during sunrise at the international airport in Munich, Germany, January 9, 2018. REUTERS/Michaela Rehle - RC1E5B4C2870/File Photo

By Victoria Bryan

BERLIN (Reuters) – With inflation paramount in investors’ minds at a time of rising wages and oil prices, the line separating winners and losers in the global airline industry this year looks likely to be drawn on how well they manage costs, especially on the labor side.

Industry body IATA in December flagged higher spending on labor and fuel – which make up about half of airlines’ operating expenses – as their members’ biggest challenge in 2018, especially after several years of record profits.

Labor costs surpassed fuel as global airlines’ biggest single expense in 2016, at 22 percent of costs against just under 21 percent for fuel. That is expected to jump this year to 30.9 percent versus 20.5 percent for fuel.

Back in 2013, when oil prices were much higher than now, fuel was 33 percent of expenses against 18 percent for labor.

Staff costs are typically higher in North America and Europe than in Asia, where fuel remains the biggest expense.

The crux of the issue is that amid signs of a global shortage of workers generally, in some regions there’s also a scarcity of qualified pilots at a time of expanding fleets.

“As airlines have been making profit, the workforce has got market power, so that is pushing up the cost of labor,” IATA Chief Economist Brian Pearce said in an interview.

Overall, unit costs – the measure of how much it costs an airline to operate each kilometer and seat flown – will rise 4.3 percent this year versus 1.7 percent in 2017, IATA forecasts.

In the highest profile example of the pressures, budget carrier Ryanair was compelled last year by pilot shortages to cancel thousands of flights, and in December recognized trade unions for the first time.

The battle that forced Ryanair’s hand could put wage pressures on other European budget carriers such as Wizz, industry experts say.

The bigger carriers feel it too.

At Air France, 10 unions representing pilots, cabin and ground staff have called for a strike on Feb. 22 to push a demand for a 6 percent pay rise.

“After three years of strong profitability improvements in the sector, we believe personnel and suppliers are asking for wage/price increases and thus keeping non-fuel costs under control will remain a challenge for the sector,” Kepler Cheuvreux analyst Ruxandra Haradau-Doser wrote.

The wage issue has even extended to the United Arab Emirates, the Middle East trade and financial hub where labor disputes are rare and unions and industrial action are banned.

The region’s largest airline, Dubai-based Emirates, is facing calls from cabin crew to improve conditions and benefits. Employees say management is considering their requests.

Last week, brokerage Kepler Cheuvreux cut its rating on German flagship carrier Lufthansa – already on its lists of stocks to avoid and least preferred in the sector – to “reduce” from “hold”.

In the United States, investors are worried that the three largest carriers – American, Delta and United- are heading for a price war just as higher costs from pay increases agreed last year start to bite.


Lufthansa, British Airways parent and Air France-KLM are all expected to report improved 2017 profits when they publish results over the next few weeks.

All airlines will need to look at areas where they can save, however.

“The most successful airline managements are the ones that have been very cost-focused every day – not just on staff costs but on aircraft costs, airport charges, distribution costs and so on,” said aviation consultant John Strickland.

The success of Ryanair, which boasts of having the lowest costs in Europe, is partly down to hard negotiating with manufacturers and airports to get good deals on orders and fees, those in the industry say.

Strickland said that while pilot costs would rise, Ryanair was unique in having much lower overall costs than rivals.

“If they can continue to keep other items such as airport and aircraft costs down, then they will still be in a very strong position.”

Lufthansa has been taking a tougher stance lately both with staff and airports.

Unlike in previous negotiations for its main brand in Germany, Lufthansa stayed firm during a series of pilot strikes from 2014 to 2016 and has now struck a deal to cut its cockpit staff costs by 15 percent, while an increase in ground staff’s wages will be partly linked to company profits.

Last year, it also put pressure on Frankfurt Airport operator Fraport by moving planes to Munich. It predicts unit costs will fall by 1-2 percent this year.

Analysts at Barclays say while such measures should help Lufthansa, the rate of improvement is not sustainable and progress still needs to be made at budget unit Eurowings, which earns less than half the margin of its nearest peer.

“There is a significant amount more work for the company to do on its cost base,” they wrote in a note.

Along with strong travel demand thanks to robust economies and low oil prices last year, European airlines have also benefited from some consolidation following the insolvencies of Air Berlin and Monarch, which helped lead to higher ticket prices.

In addition, many European carriers hedged on jet fuel – unlike their U.S. counterparts who got burned making the wrong bets when the oil price starting tumbling in mid-2014 – meaning the impact of higher fuel prices will come through for European airlines later than U.S. ones.

EasyJet’s revenue per seat rose 6.6 percent at constant currencies in the quarter to end-December, the no-frills airline said, citing the struggles of rivals including Air Berlin, Monarch, Ryanair and Alitalia. It forecast a rise of 5-9 percent for the six months to March.

“Airlines need to be careful they don’t lock themselves into cost structures that are too high for weaker economic conditions,” IATA’S Pearce warned. “At the moment, they’re not doing that but it’s always a risk.”

(Reporting by Victoria Bryan; Editing by Sonya Hepinstall)