Consumers are seeing prices continue to rise for several reasons, according to Richard Moody, chief economist at Regions Financial Corp.
In a Wall Street Journal (WSJ) report citing a likely rise in consumer prices for June, Moody outlined that the main factor in the increase was the inability of businesses to keep up with consumer demand.
The senior vice president at the Birmingham-based financial services company also said a rebound for industries heavily impacted by the COVID-19 pandemic has contributed to the June inflation figures.
Based on a survey of economists, WSJ estimated that the Labor Department would report a 5% increase in the consumer-price index from a year ago. This is the highest 12-month rate since 2008.
“Demand is coming back very rapidly, and businesses are normalizing prices in the sense that they are making up for declines,” Moody told WSJ.
Consumers in Alabama and across the country have seen increases in goods inflation as a result of supply shortages and higher shipping costs.
Moody explained that April and May marked the two largest monthly increases in prices of goods on record.
Consumer demand has been ramped up by an economy which is now entirely open and has received an infusion of trillions of dollars in federal COVID-19 relief.
Businesses have struggled to fill job openings to keep up with the increased demand.
The National Federation of Independent Business (NFIB) reported in its June jobs report that 46% of small business owners had job openings that they could not fill. The historical average for small businesses unable to fill positions is 22%.
“In the busy summer season, many firms haven’t been able to hire enough workers to efficiently run their businesses, which has restricted sales and output,” said NFIB chief economist Bill Dunkelberg. “In June, we saw a record high percent of owners raising compensation to help attract needed employees and job creation plans also remain at record highs. Owners are doing everything they can to get back to a full, productive staff.”
Gov. Kay Ivey discontinued the federal unemployment supplement in June as part of an effort to encourage more workers to reenter the workforce.
She remarked at the time of her decision that the program had always been meant as a short-term solution.
“As Alabama’s economy continues its recovery, we are hearing from more and more business owners and employers that it is increasingly difficult to find workers to fill available jobs, even though job openings are abundant,” said Ivey. “Among other factors, increased unemployment assistance, which was meant to be a short-term relief program during emergency related shutdowns, is now contributing to a labor shortage that is compromising the continuation of our economic recovery.”
Workforce challenges and inflation concerns are not only a problem in Alabama, according to Dunkelberg.
“The labor shortage is holding back growth for small businesses across the country,” he stated. “If small business owners could hire more workers to take care of customers, sales would be higher and getting closer to pre-COVID levels. In addition, inflation on Main Street is rampant, and small business owners are uncertain about future business conditions.”
Tim Howe is an owner of Yellowhammer Multimedia
