Inflation not expected to be as bad as in 1970s, economist says

Inflation not expected to be as bad as in 1970s, economist says

Economists refer to the 1970s as The Great Inflation.

In 1973, inflation more than doubled to 8.8%.

Later that decade, it went to 12%.

And by 1980, inflation was at 14%.

Things aren’t likely to get that bad this time around, Donald J. Rissmiller, vice chairman and chief economist at Strategas Securities, told the Greater Owensboro Chamber of Commerce’s Rooster Booster Breakfast on Thursday morning.

But the current inflation rate is the worst since then, he said.

So far this year, he said, the inflation rate is at 8.6%, but is expected to start dropping soon.

The nation’s — and the world’s — economy needs price stability, Rissmiller said.

“And we don’t have that at the moment,” he said.

The problem, Rissmiller said, is that the world’s economy has had very large shocks over the past two years with the coronavirus pandemic and the labor shortages that followed.

“We have to get supply and demand balanced,” he said.

The Federal Reserve Board raising interest rates is designed to bring down demand to meet supply and cool inflation, Rissmiller said.

With demand rising faster than supply, he said, the economy is creating bottlenecks and supply-chain issues in products, transportation, labor and energy.

Used car prices are up 45% this year because of more demand than supply, Rissmiller said.

But he said used car prices are starting to cool.

The nation’s workforce needs to improve with more people working, Rissmiller said.

The Daviess County workforce dropped from 47,155 in March to 46,746 in April.

The Federal Reserve Bank of St. Louis says it peaked at 51,076 in 1999.

That means that there are 4,330 fewer people working or looking for jobs here now than there were 23 years ago — despite the fact that the population has increased by 12,338.

Factors, Rissmiller said, include an aging population, child care issues and burn-out in some fields, like healthcare during COVID.

Raising wages to lure more people to certain companies is increasing inflation in the service industries, he said.

“If wages rise 4%, it will be hard to hold inflation at 2%,” Rissmiller said. “We need price stability, and we have to balance supply and demand.”

Rissmiller co-founded Strategas, an institutional brokerage and advisory firm with offices in New York City and Washington, D.C., which serves clients in more than 20 countries, in 2006.

Before that, he was an economist and managing director at the International Strategy & Investment Group.

Prior to that, Rissmiller worked at the Federal Reserve Bank of New York, focusing on the analysis of U.S. macroeconomic data and price/wage forecasting models.

By Keith Lawrence Messenger-Inquirer