By BRENT MARTIN
St. Joseph Post
A vice president with the Kansas City Federal Reserve says a tight labor market continues to fuel inflation.
Kansas City Fed Executive Vice President Joseph Gruber says four factors play the largest role in pushing prices higher in the United States: energy costs, supply chain problems, workforce, and rental costs.
Gruber says the lack of workers seems to be the biggest driver of inflation.
“So, we’ve heard a lot about the tightness of the labor market. We know that there’s a lot of vacancies relative to the number of unemployed people,” Gruber tells reporters. “These are things that are making it difficult for firms to hire the workers they need in order to increase the output that would help bring prices down.”
Gruber spoke to reporters after delivering remarks at the 2023 Economic Development Summit sponsored by the St. Joseph Chamber of Commerce held on the Missouri Western State University campus Wednesday.
Gruber speculates that the September labor report that comes out Friday will weigh heavily as the Federal Reserve Board of Governors decides whether to increase interest rates as part of the Fed’s work to rein in inflation. Gruber does say the Fed will also have to take into account any impact the current UAW strike against American auto manufacturers might have on the report.
Everyone anticipated a recession this year, but the economy kept pushing forward. Gruber says the economy has surprised a lot of forecasters.
“It is interesting that at the end of the last year I think there was a high expectation that there would be a recession sometime in the course of 2023,” Gruber says. “And as the economy has proven much more resilient than people are expecting, I think that recession expectation has been pushed back.”
Gruber says inflation still plagues the economy. Gruber says inflation has been fueled by four sources: energy costs, housing costs, supply chain issues, and the tight labor market.
Gruber says the economy in the Midwest has been holding its own.
“If you look at the unemployment rates and the labor market, for most of the region, unemployment rates are fairly low and labor markets still remain fairly strong,” Gruber says. “If you look at the consumption GDP data, I think the region is doing very well.”
Gruber acknowledges the agricultural economy has been hurt by the drought.
“So, I think the drought has been difficult, particularly for the more western parts of our region,” according to Gruber. “We have seen a decline in farm incomes this year relative to last year. But overall, farm economy still appears to be fairly healthy.”
Gruber also serves as Director of Research of the Federal Reserve Bank of Kansas City.