As the Bureau of Labor Statistics released the Consumer Prices Index for September, all news headlines read about the same. Inflation has not tapered off, as some economists said it would as the U.S. adjusted to the post-pandemic world. There are still enough jobs open, some argued that a loose labor market would not drive up wages. A booming economy would increase production of the items most Americans need for day to day life. Supply of these would be abundant, and Inflation would last a quarter or so, but not more.
There were prominent economists who argued otherwise. Former Treasury Secretary Lawrence Summers, who is a well regarded economist, said the assumption inflation could be tamed was false. Government spending to help build jobs after the 2020 recession and more proposed by the Biden Administration would fund a surge in consumer spending. Troubled supply chains would mean many goods would be in low supply. The formula for sharp inflation is already in place, Summers argued.
The September CPI supported the alarms of people who believe in Summers’ view. What consumers pay for goods and services rose 5.4% on an unadjusted basis compared to September 2020. And, for some Americans, the numbers were worse.
Take the basics that most people pay money for each month. In September, the price of beef steak rose 22% from the same month last year. The prices of several other types of meat rose by 12% to 19%. Apples rose over 7% as did chicken. Other notable increases were juices and non-alcoholic drinks up 3.9%
What are the negative effects of this inflation? In two words, “consumer spending” While wages for most Americans have risen in the last year, they have rarely risen by 8% or 9%. Consumer spending could be undermined as the prices of things people use regularly run higher than what they make. The worry is this will trigger a much slower economy.
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