DURHAM, N.C. (WNCN) – When the world shut down, Americans did an extraordinary thing. They saved money at a rate of around 20 percent. People typically save less than 5 percent. Now, many are ready to spend it, but there aren’t enough goods and services out there for everyone.
That means pent-up demand is driving prices higher, contributing to higher inflation. Costs have risen 5.4 percent, marking the highest rate in 13 years.
“They’re returning to spending activities in a climate which these same level of goods and services that we’re accustomed to having out there are not available,” said William Darity, Professor of Public Policy at Duke University.
People are also going places, so gas prices are up. In central North Carolina, the competition and cost of buying a home are also part of the problem.
“The home purchase market is definitely one of those where we’re experiencing the most dramatic increases in prices,” Darity said.
The good news is that inflation is nowhere near historic levels.
The Federal Reserve sees the bump as temporary, but much depends on the unknown. Who would have thought so many people would not get vaccinated or that a new variant would again shut down manufacturing in parts of Southeast Asia, increasing fears of going backward?
What can the government do?
Darity said a federal job guarantee, like an infrastructure plan, would help.
“When you support people’s incomes, you are also having them engage in employed work that would permit them to produce directly the goods and services that would put downward pressure on inflation,” he said.
In a nutshell, everyone needs to pay attention to the pieces of the inflation puzzle.
“In the present moment, it’s not something that is dangerous, but we want to make sure that it’s something that doesn’t become so,” Darity said.