Home » Bottom Line: U.S. Chamber economist warns serious inflation possible

Bottom Line: U.S. Chamber economist warns serious inflation possible

Cites federal spending plans, competition for workforce, self-fulfilling expectations

by Jacqueline Pitts
Kentucky Chamber of Commerce 

Inflation has been relatively low for the last 40 years going back to the early 1980s and therefore it hasn’t been the center of economic debates. But trends being seen around the country right now could point to some serious inflation.

U.S. Chamber Senior Economist Curtis Dubay told The Bottom Line the type of inflation that is economically troubling is a general increase in all prices happening simultaneously.

While we are seeing some supply chain issues with high demand and low supply in many sectors and people concerned about gas prices, those things are typically separate and tend to work themselves out. However, they can feed into the perception of inflation. Coupled with increased federal spending and workforce shortages leading to forced higher wages, there are troubling indicators for the future.

As a result of the pandemic and a staggering workforce shortage across the country, many employers are already hiking up wages to try and recruit workers. Dubay said this is the most concerning side of the current inflation discussion as this could lead to longer-term economic issues.

“For an employer having to deal with inflation, one of the issues is that you have employees coming in and asking for raises because they are having to deal with higher prices in their personal life. At the same time, employers are having to compete against the federal government and are paying higher wages on a permanent basis just to get people to come back into their place of work. If employers are having to do that over the next year, year plus, that will contribute to sustained, long-term inflation,” Dubay said. “That’s why we called for the end of the extra $300 per week federal bonus on unemployment and we are calling for states to do other innovative things.”

If the country adds more jobs and there are indicators that people are going back to work, that will provide some relief from the upward pressure feeding inflation, he said.

One way Dubay said the country will see real, permanent high inflation is if the Biden administration and Congress continue to inject even more federal money into the economy, increasing the national debt even further.

All of these factors, as well as the human element, could all lead to significant price increases as Dubay said we expect inflation, we can actually cause it by reacting to that concept.

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