What's Up With Inflation?

Blog Post
Thursday, July 22, 2021

This week on Facing the Future we looked at a subject on the minds of many economists as well as everyday consumers: what’s up with inflation? Are recent sharp increases something to be concerned about and how does it affect our economic future? We also assessed the outlook for jobs, wages and overall economic growth.

Guiding us through these issues was Robert Carroll, former Deputy Assistant Secretary for Tax Analysis of the US Treasury Department and currently Co-leader of the Ernst & Young Quantitative Economics and Statistics (QUEST) group. 

Concord Coalition Policy Director Tori Gorman joined the conversation.

“We’re in a very robust economic recovery,” Carroll said. “A lot of the economic news, beginning last May, has been much more positive than a lot of economists had anticipated.”

Carroll noted, however, that the recovery is still uneven, particularly for industries such as hospitality and travel that rely on personal interaction. “The labor market,” he said “is the one area where we need to recover more ground. We still have about 6.8 million people who were working before the pandemic who are not working now.”

Carroll expects that rapid economic growth and an upward trend in average hourly wages “is going to be very helpful to the labor market and to help bring people back from the sidelines.” 

A significant spike in inflation has also come with the strong economic growth, which Carroll attributes to unleashed pent-up demand and supply chain bottlenecks. “Inflation is expected to come down,” he said,“as the supply disruptions work their way through as the economy continues to recover.”

Even so, Carroll observed that concern over inflation is mounting. “This debate over whether [the higher trend] is permanent or transitory is becoming a bigger question mark than it was.” The increase in real wages over the past three month, while good for workers, might be an indicator that higher inflation could be more permanent, he said. 

On the other hand, Carroll pointed out that despite very strong growth and high inflation, long-term interest rates have been coming down in recent weeks. “Some people are taking that as an indication that the markets don’t currently view us as having a significant, long-term, persistent inflation problem,” he said.

Hear the entire interview on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.