SIOUX FALLS, S.D. (KELO) — If not for the COVID-19 virus, inflation, the labor issues and supply chain issues would not be as they are today, said Joe Santos, an economics professor at South Dakota State University.
About 70% of the U.S. Gross Domestic Product is the labor force and the wages paid to those who contribute to the GDP, Santos said.
Now that some of the supply chain issues may be easing as a possible projected peak in COVID may come in several weeks, the country will continue to see virus-related labor issues, Santos said.
“It’s really all about the virus at the end of the day,” Santos said. “In fact, so much so now that now that we’re starting slowly to perhaps to see some movement in the supply chain, really it’s come back to the question of whether or not we can get the labor force to participate as it once did.”
The labor market responded to COVID-19 induced recession in unique, irregular ways as even now labor participation has not returned to levels prior to the pandemic.
Santos said it’s difficult to name which products may be in short supply in the coming weeks, but he speculates in general.
“A product that relies heavily on labor throughout the supply chain… We’re gonna have some trouble getting back,” Santos. “If there is a lagging problem… I suspect it’s going be related to labor.”
Today’s inflation and the supply chain issues were also impacted by federal policy responses.
Santos said policy responses have also had an impact on the supply chain and inflation.
Stimulus plans were established to try and get the economy to function at a higher rate during the pandemic, Santos said.
Also, policies also focused on trying to get more products that were in demand.
Certain response policies, combined with shift toward buying durable goods early in the pandemic and labor issues created by the virus all contributed to inflation, Santos said.
A big shift toward buying items such as couches rather than a latte as people stayed home to work or stayed home after getting the virus was an early and lasting impact on the economy that is still evident today, Santos said.
Durable good prices have an impact on inflation, Santos said. As the demand increases or stays steady for durable good and the supply remains inadequate, the prices can increase.
“That would be tough enough on the nation’s economy if we just suddenly over the course of really a few months decided ‘no, no, no, we don’t want that much of our spending in economic activity to go into services we’d really rather it go into goods. That would be really tough for the economy to respond to even without a virus,” Santos said.
In the 10 years prior to the pandemic, there really wasn’t anything in the way of an inflation problem for decades, Santos said. Depending on how old someone is they may have never experienced inflation, he said.
Santos doesn’t expect major changes in inflation after the pandemic has peaked.
At best the economy will be improving in six months to a year, he said.