The inflation rate has seen the fastest pace of increase in over 40 years. According to a Wall Street Journal article by Nick Timiraos, Federal Reserve officials are likely to debate next week how much to raise rates in February, with views shaped by how they see underlying price pressures. If inflation slows but the labor market stays tight, they could be more divided over how to proceed.
Essentially, in order to help reduce inflationary pressures, the Fed needs to see a cooler job market. The problem is that while jobs have rebounded since the pandemic recession, the workforce has not as the labor participation rate according to the Bureau of Labor Statistics has dipped for the third straight month in November.
Some officials could seek to push through another half-point rate rise in February because they see a greater risk that inflation won’t decline enough next year. Without signs of slower hiring, they could worry that inflation could pick up again.
The Bureau of Labor Statistics found that the economy added 263,000 jobs in November so the competition for workers is only slightly slowing down. Wells Fargo economists, Sarah House and Michael Pugliese, think that “the labor market remains far too hot for the Fed’s liking.”
Others see inflation as being driven primarily by supply bottlenecks and an overheated housing market. They think that as activity cools and supply-chain woes ease, inflation will rapidly decline and be closer to 2% in the coming year, and they would prefer a quarter-point rate increase in February. Fed Chair Jerome Powell said it is hard to judge how high rates need to rise to slow the economy because of post-pandemic difficulties forecasting inflation, supply bottle-necks, and shifts in demand.
The resolution of bottle-necks will depend on an easing of consumer goods demand and the recovery in labor force participation, which can support short-run supply and expand longer-term production capacity.
However, even if the job market cools and we see a shift in demand, the effects of the past few years will still have a lingering effect on inflation. Let us help you during these uncertain times! The Easy Supply Program from Shippers is the only VMI to make this promise with zero hidden fees or charges. ESP is the only outsourced inventory management program to GUARANTEE you will have zero stockouts, lower inventory, a motivated partner, and no ordering or effort to get the items you need. To learn more about how ESP can help drive your business forward, contact us, we’ll explain it all and answer your questions.