Inflation and the Labor Market

What will happen to inflation in the future? Last month’s inflation rate was above 7%. Many economists assumed the recent inflation spikes reflect supply chain disruptions since COVID and secondarily labor shortages given changes that happened during Covid. But they assume the spikes are transitory and inflation will revert to its long-run rate of 2%. However, some market observers worry that this inflation is NOT transitory and we may be facing higher rates than we are accustomed to having. If true, this will mean interest rates will rise? What do you believe will happen to inflation in the future?

2. The future of the labor market We are facing an interesting labor market. In recent months a record number of Americans have been quitting their jobs. Companies are struggling to find workers and are raising wages. In December of 2021, the economy only created 199,000 jobs, but the unemployment rate fell to 3.9%. At the same time. the U.S workforce of 162 million is 2 million lower than before COVID and there are 100 million people not in the labor force. (Some of those are students, in the military, taking care of children, or retired. But it seems unlikely that is all of them.) Labor force participation has been trending down for 20 years and still has not recovered from COVID. What do you see at the future of the labor market?