The vehicle industry has been the poster child for supply chain problems. Delta contributed to the closure of semiconductor plants in Asia, creating a severe shortage of the chips needed to produce cars and sending the price of cars skyrocketing. But Washington is considering measures that could ramp up domestic manufacturing. That could help bring vehicle prices back to earth next year.
Another factor that should take the edge off inflation: the easing of the acute labor shortage. This shortage has led to runaway labor costs for lower-wage, lesser-educated and younger workers in service businesses that reopened en masse with the Covid vaccines. Many of these workers lost their jobs in the pandemic and have been slow to come back, since they are particularly at risk of getting sick. At the height of Delta, millions of people said they weren’t working because they were sick with Covid-19, taking care of someone who was sick or fearful of getting sick.
But as Delta has receded, people are returning to work. The labor force participation rate for younger people and high school graduates with no college surged in the most recent employment statistics. And many more may soon return to work as they quickly spend down the remaining financial support they received from the government. As workers fill the still considerable number of open positions, wage growth should moderate, as will the pressure on businesses to raise prices.