CSU Fullerton Predicting 'Stallflation' Economy

CSU Fullerton Predicting 'Stallflation' Economy
California State University–Fullerton, on Aug. 28, 2020. (John Fredricks/The Epoch Times)
Tim Shaler

Economic professors from Cal State Fullerton on Oct. 20 shared their economic projection of higher inflation and slower growth, which they called “stallflation.”

Professors Anil Puri and Mira Farka, co-directors for the Woods Center for Economic Analysis, gave their projections for the United States and regional economies as part of CSU Fullerton’s 27th annual economic forecasting conference, this year held virtually.

In late 2019, the U.S. was enjoying a “Goldilocks” economy of not too hot and not too cold.

However, the massive fiscal stimulus and monetary stimulus over the past two years is now ending that "Goldilocks" economy, leading to supply bottlenecks, labor shortages, and higher inflation, the professors said.

Regarding the widely reported problems with the supply chain, “things are getting worse, not better.” The time to ship goods from Shanghai to the United States has already gone from 41 days to 70 days.

The labor shortages were partly blamed on all the recent strong fiscal support. The economists said the amount of money directed toward the unemployed divided by the number of people reported to have been unemployed is more than $60,000—substantially higher than many were earning before the pandemic started.

There are now 10.5 million job openings. Only 7.6 million claim to be looking for work. Meanwhile, the most recent government report said that 4.3 million workers had quit their jobs during the most recent month.

According to a separate survey conducted by the Census Bureau, 12.2 million people said they were not working for COVID-19-related reasons: 4.7 million are caring for children not in school, 3.2 million are worried about COVID-19, and 4.4 million are sick or caring for someone with COVID-19.

Wage Premiums

These phenomena have particularly hit low-wage earners and the businesses trying to hire them. There are now 22 percent fewer low-wage earners in the economy than when the pandemic started. So employers are now offering low-wage earners a 26.1 percent “wage premium” to try to get them to come back to work.
Meanwhile, there are 9.6 percent more high-wage earners in the economy than when the pandemic started. Even so, high-wage earners are being offered a 7.2 percent wage premium to start a new job.

Housing Price Outlook

Looking at the housing situation in California and in Orange County, the professors noted there are now 160,000 homeless people in California and that only about one-fifth of homes listed for sale in Orange County are offered at less than $500,000.

Affordability is “worse than ever before.”

Even so, they expect home prices in Orange County, which already sell at a median price of $1 million, to gain another 5 percent over the next year and then another 3 to 5 percent in 2023.

The professors believe the $22 billion spent recently to increase housing supply and to increase shelter for people experiencing homelessness likely will not impact housing prices for another 5, 7, or 10 more years.

Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.