Inflation, Interest Rates, Labor Shortage All Taking Their Toll
With Inflation still high and interest rates on the rise, another issue businesses are finding is lack of workers. Megan Williams is an associate economist in the Regional Affairs department at the Kansas City Fed.
Williams… “A lot of that has to do with the labor force participation rate is definitely lower than it was pre pandemic. Still having trouble attracting some of those people back into the labor force that exited during that time.”
Williams says lack of labor is one key driver to this inflation.
Williams… “When businesses have trouble attracting workers, um, they will have to start to increase wages to try to attract those workers. And once that happens, businesses are paying more for workers, then they will have to then in turn look at their own balance sheets and increase their prices to the consumers.”
Automation is one area that could help, but in the meantime, the Federal Reserve continues to raise interest rates.
Williams… “Yeah, so by increasing the interest rates that will in turn kind of turn people away from borrowing, from spending, particularly those purchases that are longer term purchases, and that's going to slow down the economy. Hopefully just slow enough to where we can kind of see that inflation come down without having any too many detrimental impacts.”
Williams expects additional increases this year.