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Editorial: North Alabama prepared for shaky economy

 

Inflation strikes everywhere.

Currently running at a 40-year high, inflation is even hitting some people where it hurts most. New Yorkers, for example, are paying more for one of their beloved staples — the bacon, egg and cheese.

The cost to make the staple grab-and-go food sold at New York City’s ubiquitous bodegas has nearly doubled, from $2.50 to $4.50, according to an Associated Press story.

New Yorkers are facing the challenge by looking on the bright side.

“It means that I buy a good breakfast and stretch it to lunch and don’t eat again until I get home, which means I lose weight,” one New Yorker who stopped at a bodega for a bacon, egg and cheese told the AP.

But not everyone is so lucky to use rising prices for weight loss, and inflation isn’t limited to big cities. We’re feeling it here, as well.

According to a recent survey released by the National Federation of Independent Businesses, most small businesses are having to raise prices to cope with higher costs.

“Our members here (in Alabama) say inflation and increased labor costs are driving down any profits for the business,” Rosemary Elebash, NFIB Alabama director, said in a news release. “And when the business loses profit, it affects community involvement and contributions to local charitable causes.”

Year-to-year, producer prices have jumped nearly 18% for goods and 8% for services, according to the U.S. Department of Labor. That trickles down to the consumer level, and consumer prices rose 9.1% over the same period.

Meanwhile, there are signs the economy is slowing. The government will today release gross domestic product figures that most observers believe will show the economy has contracted for the second straight quarter. That, according to the Econ 101 textbooks, indicates a “technical recession,” although economists are already arguing over whether or not a technical recession, in this case, is a real recession. The Biden administration can point, for example, to jobs figures that, while weakening, are still strong. But whatever one calls it, two quarters of economic contraction are not good news.

The economy is already taking a toll on corporate profits, with companies from Walmart to Boeing seeing either diminishing returns or failing to meet analysts’ expectations. So much for the theory that “corporate greed” is responsible for inflation.

As the economist Milton Friedman said, inflation is always and everywhere a monetary phenomenon — meaning too much money chasing too few goods. Years of low interest rates and easy credit, plus record stimulus spending in the wake of COVID, plus persistent supply shocks all add up to more money chasing fewer goods.

The Federal Reserve has responded by increasing the price of money. On Wednesday, it raised its benchmark interest rate by three-quarters of a percentage point for the second time in a row.

Fortunately, while Alabama is not immune to the forces of inflation and recession, it is weathering them better than other parts of the country. The state’s unemployment figure recently notched another record low, and gas prices here have never reached quite the stratospheric heights they have in other parts of the country — and they’re now on their way down.

Madison and surrounding communities are still in growth mode, adding new businesses — both chains and locally owned — seemingly every week.

There are rough times ahead, but north Alabama has a solid base to help weather them.

 – From The Decatur Daily

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