COLORADO SPRINGS – Prices are increasing faster than they have in four years and the pressures being put on businesses to stay afloat are mounting, according to PhD economist Tatiana Bailey.

The latest Consumer Price Index for the month of January from the Bureau of Labor Statistics tracked a price increase of 7.5% over the last 12 months.

“If businesses are still saying they can’t find qualified workers, they’re increasing their wage compensation, transport costs are still high, they can’t get all the goods that they need, we’re still in this quagmire and inflation is not likely going to abate any time soon.”

Bailey, who is also the director of the Economic Forum at the University of Colorado-Colorado Springs, cites this information from January’s survey of small and medium sized businesses by the National Federation of Independent Businesses.

In that survey, 61 percent of businesses say they raised prices during January.

Looking at the labor market, Bailey says businesses are oftentimes competing with each other for employees.

Between people who are considered unemployed and people who are not actively seeking work, but who are able to work, there are around 12.5 million people who can work. That’s slightly more than the 10.9 million open positions, Bailey says.

But she said a whopping 93% percent of businesses report having few or no qualified candidates for their open positions.

“Maybe, optimistically, we can say we have one available for every job that’s out there. But that’s only if you have the right people, at the right place, at the right time with the right skill set. Of course, that skill set portion is the hardest part,” Bailey said. “[Businesses] are justifying these wage increases because they kind of have to.”

However, in studying the NFIB survey, Bailey found more businesses say input costs— like shipping transportation and buying goods— play a stronger role in their decision to raise prices.

That problem may solve itself if the pandemic allows it, Bailey says.

She points to structural problems in the labor market: a shrinking labor pool, less population growth because of declining immigration and birth rates, and a major skills gap.

Supply hhain issues will take time to resolve, but, Bailey says, once it does, things could be looking up – or, rather, down – as in inflation.

“The rest of the world will be able to produce things more fluidly than it has over the past two years,” Bailey said. “So I think that portion of it will abate by 2022, probably by the end of the year – if nothing else happens.”