It is as if the coronavirus has infected the economy and we know that once that thing gets you hooked on one of its spikes it’s difficult to wiggle off.
COVID is, enexpectedly, wobbling and toggling this way and that, at very low relative levels but it is getting its hooks into around 15,000 American bodies every day. The steady, seemingly inexorable decline that was its death throes has leveled in the last ten days or so. Deaths too make a herky-jerky plateau.
This phenomenon has its twin in economic data the past two months. Job gains were a shocking ten percent or so of forecasts in April and failed to meet expectations, by a lot, too, in May.
The canary in the coal mine for economic hospitalization ahead however is inflation. That is the metric that most clearly has analog to the virus’ spiked nodes. During the same two months inflation rose dramatically and once the spikes of inflation latch onto the body economic there is no silver bullet vaccine that confers immunity. Historically the Federal Reserve raises interest rates to choke off inflation’s oxygen, but “I can’t breathe” is as ominous for economic life as a cop with his knee compressing your windpipe is for human life. If the Fed raises interest rates it could push the still recovering economy back into recession, depress the stock market, spook emoloyers in hiring, cause unemployment, to all of which the c.w. counsels flooding the financial markets with money by lowering of interest rates which ignites inflation and erodes workers’ paychecks. There is no way out when inflation takes hold but pain.
There are pandemic-related dislocations in the economy, for example the 25% rise in used auto sales, the third or fourth cash giveaways to Americans in the epidemic. Some economists believe those cash outlays with no strings attached are incentivizing some Anericans to stay home and not work. Both of these are rightly viewed as overwhelmingly likely to be temporary.
But even if one takes used car prices out of the data, energy prices are increasing, and inflation is still there. We have had two consecutive months now of lower than expected job gains and higher than expected inflation. If COVID cases had risen as dramatically in the same time, Dr. Rachelle Walensky would be commtting hari-kari in her next official statement from CDC.
An extravagantly, floridly Liberal Democrat, I will have no truck with inflation. Two months is trend enough for me with a virus as intractable as inflation. The president has backed away from extending unemployment benefits in acknowledgement of its possible role in the jobs shortage but his infrastructure bill is DOA.
The Bidens have shown themselves to be quick and nimble in response to the unexpected, determined to snuff out embers when they first detect the faintist glow. They have to be quick, nimble enough to do a 180, and decisive, now, ready at the drop of a hat to smother inflation in the crib whatever the consequences to their legislative dreams. The president is going to have to be bold in being less bold to stifle the one problem that gives cold sweats to conservative and liberal economists, policy makers, investors and main street alike: inflation.
