Each morning, I peruse our news sources for items for the BIZ. Daily Report. Toward the end of each week, I can usually find unemployment news, consumer price reports, etc. This morning (Friday) was no different, except the sounding of the alarms.
National news outlets report inflation has made its biggest jump since the recession of 2008. Some even say the percentage rivals The Great Depression. It would be easy to blame outside forces like COVID-19 for these price increases. After all, we know what that did to toilet paper supplies.
The most fundamental economic factors that affect the pricing of products are supply and demand. A slightly deeper dive reveals a self-inflicted reason for our current inflated prices as well — an absent workforce.
When supply chains are constrained, yet demand either increases or stays the same, prices naturally rise. When the response to COVID-19 shut down businesses, schools, government entities, and many other job producers, officials sprang into action to help those workers mitigate the sudden loss of income.
The shutdowns didn’t have an immediate effect on inflation, mainly because demand for many products and services also dropped. In fact, many industries thrived by catering to the stay-at-home market.
With stimulus payments and increased unemployment benefits, Americans were still able to spend in the economy, shoring it up for the moment. However, a problem was beginning to materialize. Workers weren’t returning to their previous jobs. The perceived benefits of not working were outweighing the benefits of returning to work. After all, why work for a check when the next one from the government was on its way?
Now, that most of the nation is nearing pre-pandemic open levels, the lack of workers in the supply chains is really being felt. From furniture to cars to powdered supplements, just about everyone is feeling the pinch. Restaurants may be open, but cannot serve a “full house” due to a lack of wait staff.
While lamenting about the delays in receiving product, one furniture store manager told me, “The items are on ships in the ocean, there’s just no one on the docks to unload them.”
So, it is no surprise that dangerous levels of inflation are upon us. Now that consumers are feeling the effects in their pocketbooks, they are asking, “What do I do?”
Oddly, national news organizations are suggesting that people pool their resources to buy in bulk, turn off the lights more, and check the freezer for old items that can be cooked. These are always great cost-saving measures, but the suggestions ignore the fundamental issue with this round of inflation.
The quickest way to bring the costs of goods and services down is to increase the supply. In this case, the quickest way to increase the supply is to have an adequate workforce to manufacture, distribute, transport, and sell goods and services.
Do you want inflation to slow or stop? Then go back to work.
David Specht is president of Specht Newspapers, Inc. and publisher of BIZ. Magazine.
