In the past inflation has been low, so no one really cared how much corporate profits contributed to almost no inflation. So Andrew is saying prices did not go up because costs went up. He's saying corporations pocketed more. They've raked in more profits. And you might think it's probably just that there was more demand for things, right? Like when there is more demand, corporations can get more out of us. But Andrew found that across industries that experienced very different levels of demand, profits went up. When we looked at the markup growth, they were very similar.
Economists say that inflation is just too much money chasing too few goods.
But something
else can make inflation stick around.
If you think of the 1970s, the last time the U.S. had really high sustained inflation, a big concern was rising wages. Prices for goods and services were high. Workers expected prices to be even higher next year, so they asked for pay raises to keep up. But then companies had to raise their prices more. And then workers asked for raises again. This the so-called wage-price spiral.
So when prices started getting high again in 2021, economists and the U.S. Federal Reserve again worried that wage increases would become a big problem. But, it seems like the wage-price spiral hasn't happened. In fact wages, on average, have not kept up with inflation.
There are now concerns about a totally different kind of spiral: a
profit-price spiral. On today's show, why some economists are looking at inflation in a new light.
This episode was produced by Sam Yellowhorse Kesler and engineered by Katherine Silva, with help from Josh Newell. It was fact-checked by Sierra Juarez and edited by Jess Jiang.
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