Thinking Citizen Blog — Is the Inflation Monster Back? Is This Time Different? Whom Can You Trust?
Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day
Today’s Topic: Is the Inflation Monster Back? Is This Time Different? Whom Can You Trust?
A broken clock is right twice a day. Inflation hawks have been predicting the return of 1970s inflation for the last thirty years. Will they finally be right? The coincidence of rising commodity prices, skyrocketing government spending, and soaring money supply growth appears to many to be the perfect recipe. Today, a few notes. Experts — please chime in. Correct, elaborate, elucidate.
THE APRIL CPI REPORT — a big deal or much ado about nothing?
1. “Overall, prices in April climbed 4.2% year over year, the biggest such gain in the headline CPI data since September 2008. Even when you strip out volatile food and energy prices — so-called core CPI inflation — prices rose by 3% year over year in April.”
2. “Month over month, core CPI inflation rose by 0.9% in April, the biggest one-month jump since 1982.”
3. Certain components of the April CPI report saw historic gains. Used cars and trucks were 10% more expensive in April than in March, for instance, marking the largest month-over-month price gain since the BLS began keeping numbers in 1953. Used vehicle prices were up 21% from last April. Gas prices in April, meanwhile, rose 50% year over year.”
THE EMPLOYMENT REPORT TELLS A DIFFERENT STORY
1, “While CPI inflation rose, the April jobs report was a stinging disappointment.”
2. “Many fewer jobs were added than expected in the month, and many millions more remain out of work.”
3. “Fed Chair Jerome Powell has said repeatedly that he is focused on getting back to full employment and that he won’t be swayed by temporary rises in inflation.”
NB: “Instead of watching the unemployment rate drop slightly for April, as we’ve watched it do each month over the fall and winter, it actually went up.”
STRUCTURAL FACTORS — Demographics, globalization, unionization
1. The aging of the population of the developed world is still deflationary.
2. As is globalization.
3. Will the Biden administration’s pro-union policies reverse the secular decline of unions?
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