I wish I could tell you that the price of gas will come down–or at least not rise as fast; that the prices of eggs, bacon, steak, toilet paper and diapers will moderate; or that this Christmas season won’t feature empty store shelves and gifts won’t be delayed until 2022.

However, economic indicators are flashing. Sorry, Janet Yellen, Inflation isn’t “transitory,” but will likely be around for a while as supply chain disruptions are expected to persist well into next year. Fingers cross that a major natural disaster doesn’t pop up and hobble production, shipping or transportation.

President Biden and his advisors are at a loss for what to do. Perhaps the best thing that Washington can do is to not the fuel the fire of inflation by flooding households and the economy with $3.5 trillion (or more) of federal dollars.

New economic indicators

Economic signals indicate that U.S. companies are struggling to get goods produced and onto store shelves. This trend doesn’t appear to be changing anytime soon.

According to data released by the Federal Reserve yesterday, production by factories, mines and utility companies (or industrial production) fell by 1.3% in September. Lingering Hurricane Ida effects contributed to manufacturing disruptions.

This adds to last week’s consumer price index data or inflation rate of 5.4% for the month of September compared to one year prior. As our inflation tracker indicates, for items like bacon, eggs, and kids shoes, inflation has hit double-digit levels from last year. 

Economists predict that high levels of inflation will remain for some time. In a Wall Street Journal survey of over 60 economists, most see inflation sticking at above 5% through the end of the year. They have slashed forecasts for how fast the economy will grow this year in half because of supply-chain disruptions. 

Concerningly, these woes are expected to weigh down the economy through much of next year. Almost half of the economists surveyed (45%) estimate that it will take until the second half of 2022 for supply-chain hiccups to get straightened out. 

Pessimistic predictions are not uncommon, but it’s difficult to deny that workers not returning to– and leaving– the labor force. This in turn makes it difficult to manufacture goods, unpack shipping containers,  transport goods from ports or warehouses, and stock store shelves. This is causing much of the supply-chain disruptions that are giving retailers, businesses, and economists heartburn.

Where have all of the workers gone?

Where are workers? The short answer is likely at home. Many have retired. Some may be skittish about catching COVID-19. Others have quit to look for something else, perhaps jobs with better hours, more flexibility, or higher pay. Still, others may not feel the pressure to look for work with government checks coming to their door. Households are flush with cash whether or not they need and whether or not they work. 

Too much federal spending has been driving inflation and many Americans know it. That’s why passing another $3.5 trillion of spending to boost entitlements that aren’t for the needy but blanketed to every household will undermine work. If we want inflation to moderate and workers to return, the spending bill is not the answer.