To meet its dual mandate to pursue price stability and maximum employment, the Federal Reserve Bank of San Francisco keeps a close watch on economic trends throughout the Twelfth District. Doing so entails not only studying the latest economic data and statistics but also talking directly to community organizations, businesses, and workers in our region.
These conversations provide valuable firsthand insights about the state of the economy, enriching our understanding of how inflation and other economic conditions are affecting the communities we serve.
For one of our most recent discussions, Sylvain Leduc, Executive Vice President and Director of Research at the SF Fed, and Ian Galloway, Vice President and Regional Executive of our Portland branch office, sat down with Pacific Northwest labor and building trades leaders to talk about the pressing economic issues facing their organizations and their members.
While the beginning of the pandemic saw a dramatic spike in unemployment in service professions and part-time positions, skilled labor did not experience those same high unemployment rates. The labor market has steadily recovered with historic growth in jobs, wages, and benefits. At the same time, the increase in inflation has had an impact on this progress by decreasing employees’ purchasing power.
To begin the roundtable, Sylvain and Ian asked the union labor leaders how this mixed situation–strong labor market; high inflation–influenced their economic outlook.
A strong labor market has boosted labor but long-term challenges persist
Union leaders noted that the strong labor market has provided a boost to the labor movement and to workers generally. For example, pay in service and hospitality sectors has been quickly rising and recent examples of work stoppage and collective bargaining campaigns are raising the national consciousness about the value of labor.
Roundtable participants observed that demand for labor remains high with some sectors such as nursing and public service facing a serious under-supply of workers. Given this high demand, the participants believe employees have more bargaining power than in previous periods. Some of the leaders saw the possibility of a transformational moment for the labor movement.
At the same time, participants also noted that the positive trend of high demand and examples of union membership growth in the Pacific Northwest have not reversed the overall national decline in union membership density that has been taking place over the last decades. They also noted continuing challenges in the changing economy such as the general precarity of work and the use of misclassification to the disadvantage of employees.
High inflation has multiple effects
Turning to the topic of high inflation, the roundtable participants noted multiple effects stemming from rising prices. The increased cost of living puts more economic strain on their members. This is especially true for construction apprentices and those in pre-apprenticeship programs. Pre-apprenticeship programs, a helpful step in joining a union in the construction trades, typically don’t pay wages. Participants in these programs thus often need additional jobs. Higher prices take a bite out of the wages from such jobs and make it harder for those in apprenticeship training to make ends meet.
Inflation has also influenced some unions’ contract negotiations. Instead of negotiating for more benefits such as higher contributions to insurance and pension funds, some unions have focused on negotiating for higher wages in part to help offset higher prices. To hedge against inflation, union leaders pointed to several examples of unions front-loading wage increases and negotiating for longer-term contracts that provide steady wage growth over an extended period.
To the extent that price instability translates into general uncertainty about economic conditions, construction unions have a more difficult time forecasting the number of apprenticeships to offer as an example. Such forecasting difficulties make it harder for the trades unions to ensure that there is a demand for the individuals who finish their apprenticeships.
The future looks positive but a recession worries linger
Roundtable participants had a generally positive outlook about the future. Some noted that demand for union skilled labor remains strong and that there are numerous investments in construction projects in the pipeline that should help keep their members busy.
Sylvain asked the leaders how their members were reacting to the Federal Reserve’s monetary policy tightening. In response, leaders cited the increase in mortgage rates as one direct area where employees are feeling the effects of the Federal Reserve’s policy decisions. Leaders also expressed concerns about the possibility of recession, noting that an economic downturn would severely impact their members and all workers.
The Twelfth District is the largest and most diverse in the Federal Reserve System. To ensure that the economy works for all the people in our region, it is vital for us to understand their economic needs and concerns. That is why we will continue to engage our constituents through roundtables like this one. We make better policy decisions when we listen to and learn from the communities we serve.
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.